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: