EDHEC Research Insights

This issue is an Infrastructure Benchmarking Special.

First we discuss the rise of #fakeInfra and how it has been an impediment to the development of real infrastructure investment. There is no such thing as a “listed infrastructure asset class.” It is presented to investors as an opportunity to gain exposure to something new or rare, but has really always been available, that is, it is already ‘spanned’ by existing capital market and other instruments.

We prove our point with a study of listed infrastructure, showing that any “listed infrastructure” effect was already spanned by a combination of capital market instruments over the past 15 years in Global, US and UK markets. We then present the results of private equity and private debt indices. On the private equity side, we created the ability to measure the risk-adjusted

performance of private infrastructure equity investments on a comparable basis with other asset classes. These results allow asset owners and managers to begin to evaluate how they might better access infrastructure investments, so that infrastructure investing can become a means to an end and help them meet their investment goals in a more meaningful manner.

On the debt side, we conclude that a private infrastructure senior debt index exhibits investment characteristics that set it clearly apart from a senior corporate debt index. However, this broad market infrastructure debt index is composed of two subgroups of assets that have different profiles: the first one, infrastructure project finance, has a unique risk/reward profile and offers a relatively high reward per unit of risk, especially since 2007; the second one, infrastructure corporate debt, is a higher-risk/higher-return version of the corporate debt market, but it does not offer a better level of risk-adjusted performance than corporate debt.

We describe how investors need their private asset managers to adapt better valuation methods. Asset owners are winning the argument to lower private equity manager fees, their next battle will be about the valuation of private assets.
Finally, we detail our approach to the private equity and debt valuation used to build the infrastructure investment benchmarks created by EDHECinfra.

We hope that the articles in the supplement will prove useful, informative and insightful. We wish you an enjoyable read and extend our warmest thanks to AsianInvestor for their partnership on the supplement.

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