BlackRock gets new Saudi mandate to manage infrastructure fund

BlackRock Inc. has been hired by Saudi Arabia to manage a new investment fund established to help finance a drive to upgrade infrastructure across the world’s biggest oil exporter.

The U.S. asset manager will help Saudi Arabia create and oversee the National Infrastructure Fund, which expects to be involved in financing around $53 billion worth on projects over the next decade in industries from power and water to health care, according to a statement on Monday. 

The size of the fund hasn’t been determined yet, but it will be backed entirely by the National Development Fund, a Saudi government entity chaired by Crown Prince Mohammed Bin Salman. 

“There is huge interest from investors around the world in infrastructure and our role with NIF is to help institutionalize the infrastructure market in Saudi Arabia in order to attract more foreign capital,” said Yazeed Almubarak, chief executive officer and director of BlackRock Saudi Arabia.

BlackRock’s ties to the kingdom have been expanding as the crown prince, who assumed his de facto leadership in 2017, has sought to get better returns on investment of the nation’s oil wealth, while also diversifying the economy and opening it up to more foreign capital. 

The world’s largest asset manager, which opened an office in Saudi Arabia over two years ago, is also advising the kingdom’s sovereign wealth fund on its investment framework for environmental, social and governance issues. BlackRock Chairman and CEO Larry Fink is a frequent visitor to Saudi Arabia, and usually appears at the annual investment showcase in Riyadh organized by the wealth fund. 

Spending Pathways

Saudi Arabia has meanwhile been looking to shift a greater share of public-sector spending outside the budget by channeling investment through its wealth fund and the National Development Fund. Despite a surge in oil prices, it plans to keep fiscal expenditure restrained and projects a small surplus in 2023 after years of deficits.

The Public Investment Fund, as the wealth fund is known, has already outlined plans to spend $40 billion a year domestically, including on huge new projects including tourism destinations on the Red Sea and an entirely new city called Neom that’s expected to cost $500 billion.

Set up in 2017, the NDF oversees other state development funds and banks. The new infrastructure fund will invest both debt and equity in new projects, and offer sweeteners like credit guarantees to encourage foreign and domestic investors to commit money into the kingdom.

“Infrastructure is critical for economic diversification and is a fundamental pillar element of” reforms known as Vision 2030, said Stephen Groff, governor the National Development Fund.