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.
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As of 2019-09-30 the EDHECinfra Global Broad Market Unlisted Infrastructure Equity Index had a total market capitalisation of USD337.35bn, representing 516 firms. Since inception, a total of 621 firms have been included in this index.
Overall, expected returns continue to decrease at an average Index-level IRR (yield to maturity) of 6.7% per year. This continued decline in discount rates produced higher capital returns in Q3. On a local currency (fully hedged) basis, the index returned 3.75% in Q3, broadly in line with its Q2 gain of 3.60%. Infrastructure equity returns have been on the rise in 2019 and this trend continued into the second half. Lower market risk premiums bolstered performance, combined with interest rate cuts around the world.
USD index returns (above) have been on the decline, shrinking to 0.34% in Q3 from 1.46% in Q2. This stems from significant depreciation of the GBP against the USD and the weight of UK firms in the index as, overall, infrastructure equity returns in local currency increased in 2019. USD unlisted infrastructure equity index outperformed both public equity and listed infrastructure equity in Q3.
The Global unlisted infrastructure equity, value-weighted EDHECinfra index is a market value- weighted representation of the Global Private Infrastructure Equity Market. It covers all investable infrastructure sectors as defined by the TICCS classification. Index constituents include all business models and both infrastructure projects (SPVs) and corporates.