Oct 18, 2018

Blackstone's financial ties to Saudi Arabia

Dan Primack, author of Pro Rata

Blackstone COO Jonathan Gray. Photo: Heidi Gutman/CNBC/NBCU Photo Bank via Getty Images

The Blackstone Group might have pulled its executives from next week's "Davos in the Desert" event in Riyadh, but it does not appear to be altering its deep financial ties to Saudi Arabia.

The bottom line: It's much easier for firms to walk with their feet than with their wallets.

Blackstone reported Q3 earnings this morning, and during an analyst call was asked about possible pressures related to the Saudi Public Investment Fund's anchor commitment to an infrastructure fund that so far has garnered around $5 billion (total target of $40 billion, half of which could come from PIF). An executive replied:

"We've been concerned by what we've been reading... In the short-term we may get some questions, but the key thing to remember is our investors know Blackstone is the sole GP of the capital. We have sole discretion... Investors have enormous confidence in us which is why we believe we're on a path to growing [infrastructure] to large-scale despite some near term challenges."

The only real exceptions so far have been Richard Branson and Ari Emanuel, who have both pulled out of tangible business deals with the Saudis. But expect reporters and investors to begin asking these more consequential questions, particularly as the conference fades into the past. And we'll see if Blackstone is right that this is only a "short-term" issue.

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