New EDHECinfra study finds no diversification benefits from 22 different proxies of listed infrastructure equity

Written on 05 July 2016.


Using mean-variance spanning tests for 22 different proxies of listed infrastructure that were added to the portfolio of a well-diversified investor, the authors find no conclusive evidence of a “listed infrastructure asset class” that was not already spanned by a combination of capital market instruments and alternatives or a factor-based asset allocation. The study tests for such effects in global, US and UK markets, going back 15 years and also for any persistence before and after the global financial crisis of 2008.

Several reasons motivate this study: Public equity markets are used to infer findings for the entire infrastructure investment universe, including for benchmarking purposes, but academic research so far provided no robust or conclusive evidence. Index providers have also created dedicated indices focusing on this theme and a number of active managers present investing in ”listed infrastructure” as providing access to an asset class in its own right.

Co-author and EDHECinfra Director, Dr Frédéric Blanc-Brude said the results clearly show that what is typically referred to as “listed infrastructure” is neither an asset class, nor a unique combination of market factors and cannot be used as an adequate benchmark of private infrastructure investments.

Dr Blanc-Brude said, “This new study is unique in its scope and methodology and shows that benchmarking unlisted infrastructure investments with thematic (industry-sector based) public stock indices is flawed. This highlights the importance of developing benchmarks of unlisted infrastructure investments, which is on EDHECinfra’s roadmap.”

This new paper can be downloaded via:
http://edhec.infrastructure.institute/wp-content/uploads/publications/blanc-brude_2016c.pdf

See Also

Bond Portfolio Optimization in the Presence of Duration Constraints - EDHEC-Risk Institute research article in the Journal of Fixed Income
News
- 19-07-2018
We are pleased to enclose an EDHEC-Risk Institute research article published in the...
Lionel Martellini discussed ageing population: goal-based investing and its application to the retirement problem
News
- 10-07-2018
Lionel Martellini, Professor of Finance at EDHEC Business School and Director of EDHEC-...
[EDHEC Experience] Light on the first urban Lab of Latin America
News
- 09-07-2018
Wide Open: in the explorers' shoes The third stopover of the Wide Open project has been...
EDHECInfra Days: Infrastructure Investors need proper benchmarks
News
- 05-07-2018
Earlier this month we held the first EDHECinfra Days event in London, bringing together...