Blackstone offering discounts for LPs in infra fund’s first close

  • Large investors, first-close LPs offered significant discounts
  • Open-ended infra fund expected to hold first close on $7.5 bln in March
  • Saudi Arabia PIF invests through parallel structure

Blackstone Group is offering fee discounts to limited partners who participate in the first close of its $40 billion, open-ended infrastructure fund, according to a Courtland Partners memo.

The Dec. 18 memo, prepared for Pennsylvania Public School Employees’ Retirement System, says LPs who participate in the vehicle’s first close will receive a 25 percent discount on fees over the first two years of their investment. The memo also indicates that larger commitments may be subject to a 10 percent discount over the life of their commitment.

It’s unclear how large a commitment merits the discount. Pennsylvania PSERS approved a commitment of up to $500 million to the fund at its meeting last week, subject to final negotiation of terms and conditions.

Blackstone’s structured the vehicle as an open-ended fund, with periodic opportunities for LPs to liquidate their investments.

Its first close, which is expected in March, will likely include $7.5 billion of commitments, a third of which will come from separate accounts, a memo prepared by Pennsylvania PSERS staff shows. In an October earnings call, Blackstone Co-Founder Stephen Schwarzman said the firm expected to hold its first close at some point in Q1.

Public Investment Fund of Saudi Arabia committed $20 billion to Blackstone’s infrastructure fund last year. PIF will allocate its commitments to Blackstone through a parallel fund, which will match whatever Blackstone raises from other investors up to $20 billion.

Blackstone will use its new fund to acquire or back North American projects in energy infrastructure, water and waste, transportation and communications assets. Typical deals will include between 50 percent and 60 percent leverage, according to the staff memo.

The infrastructure team is led by Sean Klimczak, who previously oversaw Blackstone’s investments in power generation and natural resources, as well as Steve Bolze, who joined the firm after a long career at General Electric.

Blackstone’s investment platform manages funds for investments in traditional PE, debt, real estate and secondary-market investments, among other strategies. The firm has more than $385 billion under management.

Action Item: To read the PSERS memos, visit

Pipelines carrying steam to wellheads and heavy oil back to the processing plant line the roads and boreal forest at the Cenovus Energy Christina Lake Steam-Assisted Gravity Drainage project 120 km (74 miles) south of Fort McMurray, Alberta, August 15, 2013. Photo courtesy Reuters/Todd Korol