Blackstone setting sights on affluent investors with infrastructure fund

Blackstone Inc. debuted an infrastructure fund targeting individuals with at least $5 million of investments, departing from the paths of rivals such as KKR & Co. and Apollo Global Management Inc. that have courted the less-wealthy “mass affluent” for such funds.

The New York-based money manager filed a registration Friday for Blackstone Infrastructure Strategies, the latest vehicle from an alternative asset manager to raise infrastructure funding from individual investors. 

The new fund, dubbed BXINFRA in the filing, didn’t disclose how much capital it aims to attract.

Blackstone has spearheaded the private equity industry’s drive to attract more capital from individuals, having formed vehicles such as the Blackstone Real Estate Income Trust and Blackstone Private Credit Fund, better known as BREIT and BCRED. 

The firm signaled that it would extend the concept to infrastructure investing during a call with analysts after its second-quarter results last month. Blackstone was preparing to roll out a vehicle giving investors “access to the full breadth of the firm’s strategies” in infrastructure, including equity, secondaries and credit, the firm’s president, Jon Gray, said.

Blackstone already ranks as one of the world’s largest infrastructure backers, with more than $100 billion invested in the asset class, including credit-related holdings and stakes in infrastructure funds purchased in secondary markets.

Chief Executive Officer Steve Schwarzman said during the analysts’ call that the firm is trying meet the growing demand for electricity created by the burgeoning artificial intelligence sector — an endeavor requiring infrastructure capital.

Greater Flexibility

KKR and Apollo have already set up infrastructure vehicles to raise money from accredited investors, defined under securities laws as individuals who have a net worth of more than $1 million — not counting their primary residence — or who earn more than $200,000 a year. To be exempt from federal rules for mutual funds, these conglomerates invest primarily in private operating companies, meaning they directly own actual businesses and hard assets, such as toll roads and airports. 

Blackstone, in contrast, will only raise money from accredited investors who are also qualified purchasers, according to the regulatory filing, a category roughly defined as people having at least $5 million of investments. While this may narrow the potential pool of investors, it provides the fund with more flexibility than the conglomerates in regard to the types of assets that it can hold.

Blackstone Infrastructure Strategies will not only invest in private infrastructure projects and companies, but it will also provide structured-debt financing to the sector and acquire interests in infrastructure funds run by third-party managers and the firm itself. 

In addition, BXINFRA will deploy as much as 20% of its net assets in debt securities, publicly traded equities, loans and derivatives, which, among other things, can be more easily cashed in when the fund needs money to buy back shares from exiting investors.

The new fund will charge an annual management fee of 1.25% and take 12.5% of total returns, with the profit allocation kicking in after the fund has generated a 5% annual gain. 

While the fund’s shares won’t be publicly traded, it will offer to buy back as much as 3% of its units after each quarter ends, according to the filing.