EDHECinfra Index Methodology
EDHECinfra indices and benchmarks aim to provide the representative, risk-adjusted performance of investments in unlisted infrastructure equity and private debt.
EDHECinfra produces calculated (as opposed to contributed) indices: our data and technology allows re-pricing hundreds of individual assets through time, using actual transaction prices to recalibrate expected returns (and discount rates).
This approach uses market inputs, thus avoiding the smoothing of returns caused by appraisal valuations and providing a genuine fair value assessment of performance.
Unlike other private indices, which only report an average performance, EDHECinfra indices include the effect of diversification and provide advanced risk metrics such as volatility, value-at-risk and risk factor prices. The index calculation method is summarised below in four key steps.
Relevant Index Families
The definition of EDHECinfra index families starts with the identification of an investible universe meeting our principal market minimum inclusion criteria discussed, and the construction of a representative sample of this universe using constituents meeting the index constituent minimum inclusion criteria.
There are two investible universe covered by EHDECinfra indices: unlisted equity and private debt.
An index family is defined by its constituents i.e. the filters applied to the sampled universe. Within each family, multiple indices can be computed using a range of weighing schemes and reporting currencies (see index rules).
In 2018, following a survey of major infrastructure investors, EDHECinfra put forward a taxonomy of the most relevant filters of the unlisted infrastructure equity and debt universes. The survey results highlighted strong preferences amongst infrastructure investors for:
- Geographic segments reflecting economic levels of development and the investibility of infrastructure;
- Broad-based sector segments (as opposed to specific sectors);
- Distinguishing between infrastructure projects and corporates;
- Taking into account the impact of broad families of infrastructure `business models';
- Reflecting the range of credit risk buckets.
Hence, our broad market index families are defined using the filters that are the most relevant to investors. Families of EDHECinfra indices fall into one of three categories: broad market indices, market sub-indices and custom benchmarks.