The subsidy to infrastructure as an asset class

  • We investigate the characteristics of infrastructure as an asset class from an investment perspective of a limited partner. While non U.S. institutional investors gain exposure to infrastructure assets through a mix of direct investments and private fund vehicles, U.S. investors predominantly invest in infrastructure through private funds. We find that the stream of cash flows delivered by private infrastructure funds to institutional investors is very similar to that delivered by other types of private equity, as reflected by the frequency and amounts of net cash flows. U.S. public pension funds perform worse than other institutional investors in their infrastructure fund investments, although they are exposed to underlying deals with very similar project stage, concession terms, ownership structure, industry, and geographical location. By selecting funds that invest in projects with poor financial performance, U.S. public pension funds have created an implicit subsidy to infrastructure as an asset class, which we estimate within the range of $730 million to $3.16 billion per year depending on the benchmark.

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Author:Aleksandar Andonov, Roman KräusslORCiDGND, Joshua Rauh
Parent Title (English):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 599
Series (Serial Number):CFS working paper series (599)
Publisher:Center for Financial Studies
Place of publication:Frankfurt, M.
Document Type:Working Paper
Year of Completion:2018
Year of first Publication:2018
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2018/09/27
Tag:Infrastructure; Institutional investors; Public pension funds
Issue:September 2018
Page Number:50
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht