Listed infrastructure research
Can portfolios of certain stocks described as "listed infrastructure" be used to proxy the characteristics of unlisted infrastructure investments? Do listed infrastructure indices or products exhibit specific characteristics when compared to broad market stock indices?
Current industrial practices make these questions relevant because numerous asset owners, managers and their independent valuers use listed infrastructure proxies to estimate the discount rates used in discounted cash flow models, and because numerous listed infrastructure products have developed that promise to deliver the characteristics of infrastructure all the while staying liquid and easy to access.
EDHECinfra has produced a series of research papers documenting the characteristics of dozens of 'listed infrastructure' proxies. The main findings include:
All listed infrastructure proxies are indistinguishable from or worse than broad market stock indices in terms of performance and risk.
Tests of mean-variance spanning confirm that 'listed infrastructure' is already spanned by existing asset classes.
Simple factor models explain away the performance of listed infrastructure indices (passive products) and fund products (active products)
In late 2017, EDHECinfra called for better regulation of the term 'infrastructure' by ESMA and the SEC to address the risk created the continued development of "fake infra."
EDHECinfra's Global Listed Infrastructure Proxy app below provides an up-to-date view the results of this research.
Read The Position Paper
The Rise of fakeinfra
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.