Infrastructure

Blackstone Continues With Billions of Dollars Heading Into Its Infrastructure Fund

Jon C. Ogg

Published: November 7, 2017 12:29 pm

Last Updated: January 12, 2020 6:33 am

Blackstone Group L.P. (NYSE: BX) is no stranger to big announcements and big investments. After all, the private equity giant recently showed that it had over $387 billion in assets under management, with inflows continuing to add on top of increased valuations.

It was not that long ago that Blackstone committed to what seemed like an unheard of $40 billion infrastructure fund, with half of that commitment coming from Saudi Arabia’s Public Investment Fund. The private equity giant hoped to match that with another $20 billion in capital.

According to a Form D filing with the U.S. Securities and Exchange Commission, Blackstone raised $20 billion from one investor for the newly created Blackstone Infrastructure Partners – P L.P.

Blackstone plans to invest in infrastructure in multiple ways. The company may purchase public companies or it may invest in or acquire infrastructure assets from other large companies and entities. The fund’s commitment is expected to begin making infrastructure investments in 2018, and due to this being a “permanent capital vehicle” the private equity fund will not be forced to sell assets, launch IPOs or spin off companies back to investors to raise capital and then wind down the fund.

While the fund was targeting $40 billion as the actual size of the fund, additional debt financing is expected to allow Blackstone to invest in more than $100 billion of infrastructure projects. Those investments are also expected to be located principally in the United States.

Credit Suisse has recently chimed in on Blackstone in a private equity and alternative asset managers sector update. The firm has a $45 per unit target for Blackstone, which would value the private equity giant at close to 40% higher than the current unit price, if distributions are included for the total return. The report talked about higher inflows and higher capital commitments coming to and from Blackstone into the fourth quarter. The firm said in its report that Blackstone is its top long name in the group and that it is on the Credit Suisse Focus List. It went on to say:

We remain positive on Blackstone’s future fundraising, as we estimate $100-plus billion of back-to-back fundraising years in both 2018 and 2019, which will lead to 40%+ FRE growth over the next three years (2017 to 2020). We believe the market is missing the improvement in Blackstone’s underlying core earnings growth, potential for accrued carry build, and distributable earnings generation in its next realization cycle (expect peak distributable EPS at $5 to $7 given current carry eligible assets under management levels).

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Credit Suisse Issues 8 Top Number-One Picks for 2018

It usually takes more than single fund announcements and developments to move Blackstone units on the market. Blackstone’s units were trading at $33.05 before earnings in mid-October and briefly hit $35.00 after that report. Now those units are back at $33.00.

Blackstone has a 52-week trading range of $23.33 to $35.05, and its consensus analyst target price from Thomson Reuters is $39.68. Note that these units were up above $43 back in mid-2015.

As a reminder, 24/7 Wall St. recently featured eight infrastructure players still expected to see upside in 2018. Most of those companies have done well over the past week and year to date.