Before giving $2.73b to Jared Kushner's firm, Saudi investment fund had big doubts

Mr Jared Kushner is said to have little experience or track record in private equity. PHOTO: AFP

NEW YORK (NYTIMES) - Six months after leaving the White House, Mr Jared Kushner secured a US$2 billion (S$2.73 billion) investment from a fund led by the Saudi crown prince, a close ally during the Trump administration, despite objections from the fund's advisers about the merits of the deal.

A panel that screens investments for the main Saudi sovereign wealth fund cited concerns about the proposed deal with Mr Kushner's newly formed private equity firm, Affinity Partners, previously undisclosed documents show.

Those objections included: "the inexperience of the Affinity Fund management"; the possibility that the kingdom would be responsible for "the bulk of the investment and risk"; due diligence on the fledgling firm's operations that found them "unsatisfactory in all aspects"; a proposed asset management fee that "seems excessive"; and "public relations risks" from Mr Kushner's prior role as a senior adviser to his father-in-law, former president Donald Trump, according to minutes of the panel's meeting on June 30.

But days later, the full board of the US$620 billion Public Investment Fund (PIF) - led by Crown Prince Mohammed bin Salman, Saudi Arabia's de facto ruler and a beneficiary of Mr Kushner's support when he worked as a White House adviser - overruled the panel.

Ethics experts say that such a deal creates the appearance of potential payback for Mr Kushner's actions in the White House - or of a bid for future favour if Mr Trump seeks and wins another presidential term in 2024.

Mr Kushner played a leading role inside the Trump administration defending Crown Prince Mohammed after United States intelligence agencies concluded he had approved the 2018 killing and dismemberment of Mr Jamal Khashoggi, a Saudi columnist for The Washington Post and resident of Virginia who had criticised the kingdom's rulers.

The Saudi fund agreed to invest twice as much and on more generous terms with Mr Kushner than it did at about the same time with former treasury secretary Steven Mnuchin - who was also starting a new fund - even though Mr Mnuchin had a record as a successful investor before entering government, the documents show.

The amount of the investment in his firm, Liberty Strategic Capital, was US$1 billion and has not been previously disclosed.

A spokesperson for Mr Kushner's firm said of the firm's relationship with the Saudi PIF: "Affinity, like many other top investment firms, is proud to have PIF and other leading organisations that have careful screening criteria, as investors."

A spokesperson for the Saudi fund declined to comment on its investment process.

If any additional discussions about the deal took place, they were not reflected in the documents and correspondence obtained by The New York Times.

The Times reported last fall that Mr Kushner had been seeking a Saudi investment.

Now, the internal fund records and correspondence obtained by the Times show the outcome, scale and timing of his firm's deal as well as the debate it aroused.

Those documents and other filings indicate that, at this point, Mr Kushner's venture depends primarily on the Saudi money.

Mr Kushner planned to raise up to US$7 billion in all, according to a document prepared last summer for the Saudi fund's board.

But so far, he appears to have signed up few other major investors.

In its most recent public filings with the Securities and Exchange Commission, dated March 31, Mr Kushner's firm reported that its main fund had US$2.5 billion under management, almost entirely from investors based overseas.

Most of that appears to be the US$2 billion from Saudi Arabia.

The Saudi documents obtained by The Times say that in return for its investment, the Saudi fund would receive a stake of at least 28 per cent in Mr Kushner's main investment vehicle.

No law or rules constrain the investment activities of former administration officials after leaving the White House; many from both parties have profited from connections and experiences gained in government.

But Mr Robert Weissman, president of non-profit group Public Citizen, called Mr Kushner's relationship with the Saudis "extremely troubling", arguing that his stance toward the kingdom's leadership as a senior adviser "makes the business partnership appear even more to be both a reward to, and an investment in, Kushner".

Saudi officials say that the kingdom's PIF, which also holds stakes in ride-sharing company Uber and Newcastle United Football Club in Britain, operates autonomously, with an elaborate governance structure that includes the investment panel.

But Crown Prince Mohammed took control of the fund when he rose to power in 2015 and he is its paramount decision-maker.

Mr Kushner, whose fund has not publicly disclosed a theme or focus, has little experience or track record in private equity.

Before working in the White House, he ran his family's commercial real estate empire, sometimes with disappointing results.

His best-known deal was the US$1.8 billion purchase of the office tower at 666 Fifth Avenue in Manhattan in 2007; the building's mortgage became a crippling liability when the recession hit the next year.

Diplomats, investors and ethics experts noted during the Trump administration that his anticipated return to the family business injected a potential conflict of interest into Mr Kushner's relationship with Crown Prince Mohammed and other oil-wealthy Arab royals.

Many are major long-term investors in American real estate, and the Kushner family had courted them before.

While advising Mr Trump, Mr Kushner developed a friendship and informal alliance with the Saudi crown prince.

Crown Prince Mohammed signaled that he favoured closer relations between Israel and the Arab monarchs of the Persian Gulf, which was also one of Mr Kushner's priorities while in the Trump administration.

He helped negotiate a series of agreements, called the Abraham Accords, opening diplomatic relations between Israel and other Arab monarchies.

After leaving government, he set up a non-profit to promote economic and other ties between the countries.

In Washington, Mr Kushner had also helped broker US$110 billion in weapons sales to Saudi Arabia over 10 years.

He helped protect those and other weapons deals from congressional outrage over the murder of Mr Khashoggi and the humanitarian catastrophe created by the Saudi-led military intervention in Yemen.

In a letter dated July 5, the Saudi fund staff explained to a board member who had questioned the size of the investment why it could not be cut back.

"This investment aims to form a strategic relationship with the Affinity Partners Fund and its founder, Jared Kushner," the letter said.

A reduction of the size of its US$2 billion stake "may negatively or fundamentally affect the framework of the agreed strategic and commercial relationship."

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