In this paper, we argue that long-term investment in thinly traded assets like infrastructure projects increases investors’ demand for investment performance monitoring, which in turns calls for the creation of new performance measurement tools.
Recent developments in asset management practices — in particular the rise of the so-called Canadian model — suggest that this demand is not being met by asset managers and other investment service providers. Still, creating long-term investment benchmarks remains a sine qua non to match the supply and demand of long-term capital, improve asset allocation outcomes for investors and support the development of the economy.
We highlight significant methodological challenges to develop performance measures that are both useful to long-term investors and prudential regulators and consistent with modern asset pricing theory and propose several directions for new research.
Solid evidence supporting the infrastructure investment narrative is still missing, and full-fledged investment solutions demonstrating the benefits of infrastructure investment for institutional investors remain elusive.
In this paper, we discuss the need, and propose an approach to benchmark long-term investments in infrastructure, where long-term investment simply refers to any unlisted and illiquid asset. We first highlight the reasons why benchmarking long-term infrastructure investments has become essential to match the supply and demand of long-term capital, improve asset allocation outcomes for investors and support the development of the economy. We then propose a roadmap detailing the steps to create benchmarks of long-term infrastructure investments.
In March 2013 the European Commission published a green paper on the long-term financing of the European economy in order to initiate a broad debate about how to foster the supply of long-term financing and how to improve and diversify the system of financial intermediation for long-term investment in Europe. The Commission requested responses to a series of questions in the Green Paper, in order to assess the barriers to long-term financing, with a view to identifying possible policy actions to overcome them. This paper presents the answers of EDHECinfra to the questions of the green paper.
In February 2012, EDHECinfra responded to the UK Treasury’s Call for Evidence about the reform of the Private Finance Initiative (PFI) with a particular reference to the opportunity for pension funds to invest in infrastructure assets. In this publication, we extend our response to the issues relating to pension fund investment in social infrastructure. Social infrastructure investments have by design the characteristics that pension funds find attractive in a liability-driven investment context: long-term contracts with steady and predictable inflation- linked income, high operating margins and high risk-adjusted return. Social infrastructure also corresponds to the bulk of the assets procured under PFI.