GLOBAL – BlackRock has hired a three-person team from Blackstone's private debt business to launch its own infrastructure debt platform focused on Germany, France, Benelux and the UK.
Philippe Benaroya and Chris Wrenn – both appointed co-heads of European infrastructure debt – and director Gilles Lengaigne previously worked for Harbourmaster, which Blackstone's GSO debt division acquired last year.
Following discussions about the raising of a GSO infrastructure debt fund, Blackstone is understood to have decided such a strategy would be incompatible with GSO's focus on sub-investment-grade corporate debt.
Asked why the team had chosen to join BlackRock, Benaroya pointed to BlackRock's ability to operate at scale, and its global presence, including a strong presence in fixed income and infrastructure equity.
"Over the past 12-18 months, infrastructure debt has started to attract attention from pension funds, insurers and sovereign wealth funds. On the other side, banks have been looking not to be the providers of long-term debt. So the market dynamics are favourable on both sides."
Benaroya said BlackRock already had a strong pipeline of primary projects.
The team will also pursue secondary loans from banks and refinancing of existing transactions.
"Investors' demand for infrastructure applies to debt as well as equity because both offer diversification benefits," said Wrenn.
"But it takes time to build up on the debt side because it's a relatively recent asset class.
Some investors have already decided on a new allocation to infrastructure debt.
"The market is in transition mode, and it's transitioning from a well-established banking market to defining alternative execution."
BlackRock global financial institutions group head David Lomas said Solvency II had proved a major catalyst for insurers to target infrastructure debt, among other alternatives, for diversified income.
The new unit will focus initially on separate mandates from existing BlackRock clients, rather than funds.
But said it could eventually expand the business to new clients.
"We're responding to existing clients' expressions of interest in what is a relatively new asset class," Wrenn said.
"Initially, that will be via managed-account mandates. We won't initially be looking at a multi-investment vehicle, but we will explore scalability.
"We have a number of very large clients looking to deploy into infrastructure debt. In aggregate, that could become quite big quite quickly."