Contents:
1. Establishing an industry standard for the infrastructure asset class
2. A survey of investor preferences for the segmentation of private infrastructure
3. Infrastructure investment in emerging markets: Closing the “data gap”
4. The Rise of “Fake Infra”
5. Credit risk in private infrastructure debt
6. Investor Perceptions of Infrastructure: Willingness to Invest
7. Take the next exit: A case study of road investments gone wrong, Spain 1998-2018
8. Three routes to maximising infrastructure finance for development
Contents
1. Establishing an industry standard for the infrastructure asset class
2. A survey of investor preferences for the segmentation of private infrastructure
3. Infrastructure investment in emerging markets: Closing the “data gap”
4. The Rise of “Fake Infra”
5. Credit risk in private infrastructure debt
6. Investor Perceptions of Infrastructure: Willingness to Invest
7. Take the next exit: A case study of road investments gone wrong, Spain 1998-2018
8. Three routes to maximizing infrastructure finance for development
In this position paper, we document the dangerous rise of the so-called listed infrastructure asset class, an ill-defined series of financial products that initially targeted retail investors and now increasingly reaches institutional investors, which now represent close to a third of the sector. As part of the study we reviewed the documentation, weights and constituents of 144 listed infrastructure funds, representing close to 90% of this $60 billion sector.
Contents:
– Access to Infrastructure Investment and #fakeInfra
– Is Listed Infrastructure an Asset Class?
– Private Infrastructure Equity Investment Benchmarks
– Private Infrastructure Debt Benchmarks
– The Valuation of Private Assets
– How to Derive Equity and Debt Index Results
This issue is an Infrastructure Benchmarking Special.
We first address the rise of #fakeInfra and how it has been an obstacle 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.
This study extends the literature by taking an asset pricing approach to examine whether infrastructure is indeed an asset class or otherwise. The question posed in this study has important implications in portfolio management and to long-term investors (such as pension and superannuation funds).
If infrastructure assets offer superior risk-adjusted returns over and above other asset classes (such as stocks, bonds, real estate, cash) then these investments will become the dominant asset class going forward. Conversely, if infrastructure assets do not exhibit return, risk and correlation characteristics which are not distinguishable from other asset classes then it can be argued that they may be classified as investment substitutes for current investments and they cannot be deemed as an asset class.
Our study presents evidence that global and regional publicly listed infrastructure index returns cannot be considered as a separate asset class. Our results suggest that listed infrastructure does not exhibit sufficient differences in their return, risk and correlations to warrant the classifications a separate asset class.
This study examines the portfolio-diversification benefits of listed infrastructure stocks. We employ three different definitions of listed infrastructure and tests of mean–variance spanning. The evidence shows that viewing infrastructure as an asset class is misguided.
We employ different schemes of infrastructure asset selection (both traditional asset classes and factor exposures) and discover that they do not provide portfolio-diversification benefits to existing asset allocation choices. We also find that defining and selecting infrastructure investments by business model as opposed to industrial sectors can reveal a very different investment profile, albeit one that improves the mean–variance efficient frontier since the global financial crisis.
This study provides new insights into defining and benchmarking infrastructure equity investments in general, as well as into the extent to which public markets can be used to proxy the risk-adjusted performance of privately held infrastructure investments.
In this paper, we ask the question: does focusing on listed infrastructure stocks create diversification benefits previously unavailable to large investors already active in public markets?