IP&E: Infrastructure debt funds come of age

Chris O’Dea take a look at the private infrastructure debt space and used EDHECinfra spread data to make his point. “An EDHECinfra study compared the yield spread over short-term risk-free rates for each type of infrastructure debt, using its universe of about 2,300 debt instruments over a 20-year period (see figure). Project debt has recently reached a plateau at about 200bps over the risk-free rate, while debt of corporate infrastructure entities such as utilities yields less. Corporate debt is also largely investment-grade, while project finance debt can be well below investment-grade, says EDHECinfra director Frédéric Blanc-Brude. In the EDHECinfra sub-indices, he says, 98% of corporate infrastructure debt is investment-grade compared with only 89% of project debt, while project debt has a duration – the sensitivity of the debt value to interest rate changes – and value-at-risk that is a bit higher than corporate infra debt.” Read the story here.

IP&E: ESG in infrastructure – Benchmark blues

René Lavanchi reviews some of the issues and debates that keep making ESG and infrastructure investment a good research topic: we don’t know enough about it. “Anything that’s reported is reported better by large companies,” says Frédéric Blanc-Brude, director of EDHECinfra. “They tend to report things that are very heterogeneous, and the standards that exist don’t force them to report metrics that are directly comparable… in terms of collecting information and making robust conclusions, it’s not enough.” “.. Blanc-Brude says that return on assets is a valid metric and is used in comparable studies. He also argues that if, as he expects, better ESG risk management leads to de-risking and therefore a capital gain, this should be a one-off event, not a continuous process. After that, he posits, returns should be permanently lower on the basis of lower risk, assuming that an ESG-focused investor is able to lower risk in the first place.” Read the story here.

FT: Infrastructure funds have become a way around decarbonisation targets

John Dizard explores recent trends in infrastructure investments and mentions our results when it comes to performance and risk for investors in unlisted infrastructure equity: Essentially, infrastructure investments are priced somewhere between the yield of a long duration bond and an energy equity. Using Edhec’s data to generate an infrastructure index, the “bond” has a duration of about 16 years, and a “coupon” or long-term cash yield that fluctuates between 5.5 per cent and 7 per cent. As Blanc-Brude said: “Infrastructure has become ‘expensive’ compared to its long-term levels, but it has a great cash yield. So it still makes sense. Even so, it is exposed to risk, especially interest rate risk. Investors should be aware of that.” Read the rest of the story here.    

Unlisted infra assets deliver 14% gain in 2019, EDHECinfra index reveals

Zak Bentley looks at the 2019Q4 release of the EDHECinfra indices. “In previous years, interest rates have gone down so discounted cashflows have gone up. In recent months, we’ve seen the bounce back of interest rates,” Frederic Blanc-Brude, director of EDHECinfra, told <em>Infrastructure Investor. EDHECinfra said some of the stronger performers in its index were assets with robust, contracted business models. The institute pointed to IH-635 road PPP in Dallas, which generated returns of 5.6 percent per annum, as an example of the robust cashflows demonstrated by contracted projects. Read the rest of the story here.

CIR: The challenges of benchmarking infrastructure in a pension portfolio

Benchmarking is important because it’s the only way to understand infrastructure investment on a multi-asset class basis, says Frederic Blanc-Brude, chief executive officer at Scientific Infra and director of the EDHEC Infrastructure Institute. “Before knowing how well your asset managers perform or anything like this, the first other questions for a [chief investment officer] are, ‘Should I invest in infrastructure in the first place? What role does it play in my portfolio? What does it contribute? How different is it from bonds and stocks? Does it have a risk profile that is interesting for me?’” Read the article here. (America and Asia only)

The Banker: Assessing sustainable infrastructure: the bigger picture

“The infrastructure sectors and their related risks is a much more challenging task, according to Frédéric Blanc-Brude, director of the infrastructure institute at business school EDHEC,” writes Silvia Pavloni for The Banker. Read the story here.            

Institutional Investing in Infrastructure: A conversation with Frederic Blanc-Brude

i3 senior editor Drew Campbell recently spoke with Frederic Blanc-Brude, director of EDHEC Infrastructure Institute, about the state of benchmarks in infrastructure investing. Here are excerpts from their conversation.

Why investing in resilience is here to stay

Daniel Kemp discusses the future of sustainable investment in infrastructure and why it is though to measure and benchmark outcomes. “firmly quantifying the precise numbers is still not easy, despite awareness of the issue growing greatly in recent years. Efforts are underway to produce industry benchmarking systems, with Natixis and EDHECinfra recently announcing a research programme into an ESG index that would include climate resilience, but it is highly complex.” “…(b)ut now, with the launch of funds like Meridiam’s and Rockefeller’s, and the development of benchmarks like Natixis’ and EDHECinfra’s, the issue is rising up the agenda. Read the story here  

Les Echos: La « smart infrastructure », clé de notre mutation économique

Pour Anne-Christine Champion (membre du Advisory Board EDHECinfra), responsable monde actifs réels chez Natixis, le secteur des infrastructures est un acteur indispensable dans l’accompagnement des mutations technologiques de notre économie. Anne-Christine Champion writes in Les Echos, “Le financement d’infrastructures a lui aussi l’opportunité de devenir plus « intelligent » et de bénéficier des progrès du traitement de la donnée. La recherche académique a, sur ce sujet, un rôle important à jouer. C’est l’objet notamment de notre collaboration avec EDHECinfra dans le cadre de notre chaire de recherche en infrastructures. Depuis son lancement en 2012, les équipes d’EDHECinfra collectent et analysent les données de performance de la dette infrastructure. Ce travail a notamment conduit à la création d’indices permettant d’analyser la performance de la classe d’actif. Le nouveau programme de recherche de 3 ans, annoncé le 7 octobre dernier, porte sur la mesure de l’impact environnemental et social des investissements en infrastructure. Il permettra d’enrichir les ensembles de données existants avec ceux issus de l’intelligence artificielle.” Read the full story here.

IP&E: Is infrastructure too expensive? In a word, no

Richard Lowe looks at the evidence available on the pricing of infrastructure assets. “Another interesting contention is that infrastructure was previously cheap and is now more fairly priced. EDHECinfra has argued that the past decade of price increases could be interpreted as “a normal process of price discovery” Read the article here.

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