SAFE commits $500m to Blackstone property fund – report
China’s State Administration of Foreign Exchange (SAFE) has reportedly committed $500 million to The Blackstone Group’s latest real estate private equity fund. Blackstone Real Estate Partners VII has proved popular with investors and Stephen Schwarzman, the private equity firm’s chairman and CEO, said last week that he is “extremely confident” of reaching a $13.3 billion final close in the coming months.
According to The Wall Street Journal, this investment is part of SAFE's wider plan to allocate about 5% of its reserves to alternative assets such as private equity. The agency is responsible for managing China's $3.2 trillion in foreign currency reserves, the bulk of which are held in US government bonds and other low-yield assets.
SAFE's first foray into private equity came in 2008, with a $2.5 billion commitment to a fund run by TPG Capital. It didn't turn out well as portfolio company Washington Mutual, the largest savings and loan firm in the US at the time, was closed down by the government in the wake of the global financial crisis.
Financial sector investments by China Investment Corporation (CIC), notably in Blackstone and Morgan Stanley, also performed poorly, prompting the organization to turn its attention to real assets such as infrastructure and property instead. This included taking a stake in Royal Bank of Scotland's $1.4 billion commercial real estate portfolio alongside Blackstone.
SAFE's interest in the private equity firm's real estate fund might be seen in a similar context. Blackstone operates the largest property PE business in the world, with more than $48 billion under management.
Last week it was reported that SAFE has agreed to buy stakes in a string of private equity funds, including vehicles managed by The Carlyle Group, The Blackstone Group and CVC Capital Partners, from General Motors' (GM) pension plan.
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