IDEAS home Printed from https://ideas.repec.org/p/ris/eibpap/2010_004.html
   My bibliography  Save this paper

Risk, return and cash flow characteristics of infrastructure fund investments

Author

Listed:
  • Bitsch, Florian

    (Technische Universität München)

  • Buchner, Axel

    (Technische Universität München)

  • Kaserer, Christoph

    (Technische Universität München)

Abstract

We analyze the risk, return and cash flow characteristics of infrastructure investments by using a unique dataset of deals done by private equity-like investment funds. We show that infrastructure deals have a performance that is higher than that of non-infrastructure deals, despite the lower default frequencies. However, we do not find that infrastructure deals offer more stable cash flows. Our study offers some evidence in favour of the hypothesis that higher infrastructure returns could be driven by higher market risk. In fact, these investments appear to be highly levered and their returns are positively correlated to public-equity markets, but uncorrelated to GDP growth. Our results also indicate that returns could be influenced by the regulatory framework as well as by defective privatization mechanisms. By contrast, returns are neither linked to inflation nor subject to the "money chasing deals" phenomenon.

Suggested Citation

  • Bitsch, Florian & Buchner, Axel & Kaserer, Christoph, 2010. "Risk, return and cash flow characteristics of infrastructure fund investments," EIB Papers 4/2010, European Investment Bank, Economics Department.
    • Handle: RePEc:ris:eibpap:2010_004
    as

    Download full text from publisher

    File URL: http://www.eib.org/attachments/efs/eibpapers/eibpapers_2010_v15_n01_en.pdf#page=108
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gundlach, Erich & Wößmann, Ludger, 2001. "Better schools for Europe," Munich Reprints in Economics 20433, University of Munich, Department of Economics.
    2. Willem H. Buiter & Clemens Grafe, 2002. "Anchor, float or abandon ship: exchange rate regimes for the accession countries," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 55(221), pages 111-142.
    3. ?gel de la Fuente, "undated". "Convergence Across Countries And Regions: Theory And Empirics," UFAE and IAE Working Papers 447.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    4. Burda, Michael C, 1998. "The Consequences of EU Enlargement for Central and Eastern European Labour Markets," CEPR Discussion Papers 1881, C.E.P.R. Discussion Papers.
    5. Philippe Martin, 2000. "The Role of Public Policy in the Process of Regional Convergence," Sciences Po publications info:hdl:2441/9328, Sciences Po.
    6. repec:hal:spmain:info:hdl:2441/9343 is not listed on IDEAS
    7. Valila, Timo & Mehrotra, Aaron, 2005. "Evolution And Determinants Of Public Investment In Europe," Economic and Financial Reports 2005/1, European Investment Bank, Economics Department.
    8. Douglas Sutherland & Sonia Araujo & Balázs Égert & Tomasz Koźluk, 2009. "Infrastructure Investment: Links to Growth and the Role of Public Policies," OECD Economics Department Working Papers 686, OECD Publishing.
    9. Yannis M. Ioannides & George Petrakos, 2000. "Regional Disparities in Greece and the Performance of Crete, Peloponnese and Thessaly," Discussion Papers Series, Department of Economics, Tufts University 0008, Department of Economics, Tufts University.
    10. Philippe Martin, 1999. "Are European regional policies delivering?," SciencePo Working papers Main hal-01011168, HAL.
    11. Fidrmuc, Jan, 2001. "Democracy in transition economies: Grease or sand in the wheels of growth?," ZEI Working Papers B 09-2001, University of Bonn, ZEI - Center for European Integration Studies.
    12. Galizia, Federico, 2004. "Systemic Credit Risk In The Presence Of Concentration," Economic and Financial Reports 2004/1, European Investment Bank, Economics Department.
    13. Steinherr, Alfred & Tukel, Ali & Ucer, Murat, 2004. "The Turkish Banking Sector - Challenges And Outlook In Transition To Eu Membership," Economic and Financial Reports 2004/2, European Investment Bank, Economics Department.
    14. Rossi, Alessandro & Canpolongo, Francesca & Bichisao, Guido, 2002. "Hedge Accounting Within Ias 39," Economic and Financial Reports 2002/2, European Investment Bank, Economics Department.
    15. Peree, Eric & Riess, Armin, 2003. "The transformation of finance in Europe:introduction and overview," EIB Papers 1/2003, European Investment Bank, Economics Department.
    16. Ferreira, Luisa & Vanhoudt, Patrick, 2002. "Catching The Celtic Tiger By Its Tail," Economic and Financial Reports 2002/1, European Investment Bank, Economics Department.
    17. O'Brien, Dermot & Wagenvoort, Rien, 2000. "Some Empirical Findings On The Characteristics Of Cost-Efficient Credit Institutions," Economic and Financial Reports 2000/1, European Investment Bank, Economics Department.
    18. Wagenvoort, Rien, 2003. "BANK SURVEY EVIDENCE ON "BANK LENDING TO SMEs IN THE EUROPEAN UNION"," Economic and Financial Reports 2003/1, European Investment Bank, Economics Department.
    19. De Grauwe, Paul, 1996. "How to Fix Conversion Rates at the Start of EMU," CEPR Discussion Papers 1530, C.E.P.R. Discussion Papers.
    20. Hurst, Christopher & Uppenberg, Kristian, 2000. "Investment Issues In South-Eastern Europe," Economic and Financial Reports 2000/2, European Investment Bank, Economics Department.
    21. Alfred Steinherr & Ali Tukel & Murat Ucer, 2004. "The Turkish Banking Sector, Challenges and Outlook in Transition to EU Membership," Bruges European Economic Policy Briefings 9, European Economic Studies Department, College of Europe.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Abraham Park & Chen Yu Chang, 2013. "Impacts of Construction Events on the Project Equity Value of the Channel Tunnel Project," ERES eres2013_97, European Real Estate Society (ERES).
    2. Ben Ammar, Semir & Eling, Martin, 2013. "Common Risk Factors of Infrastructure Firms," Working Papers on Finance 1307, University of St. Gallen, School of Finance.
    3. Surbhi Gupta & Anil Kumar Sharma, 2022. "Evolution of infrastructure as an asset class: a systematic literature review and thematic analysis," Journal of Asset Management, Palgrave Macmillan, vol. 23(3), pages 173-200, May.
    4. Fay, Marianne & Martimort, David & Straub, Stéphane, 2021. "Funding and financing infrastructure: The joint-use of public and private finance," Journal of Development Economics, Elsevier, vol. 150(C).
    5. Rabson Magweva & Mabutho Sibanda & Mariam Camarero, 2020. "Inflation and infrastructure sector returns in emerging markets—panel ARDL approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1730078-173, January.
    6. Nadine Gatzert & Thomas Kosub, 2017. "The Impact of European Initiatives on the Treatment of Insurers’ Infrastructure Investments Under Solvency II," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(4), pages 708-731, October.
    7. Evgenios Tassopoulos & Sotirios Theodoropoulos, 2013. "Feasibility of the Development of Cruise Terminal in Lavrio Port under Concession Scheme," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 3-16.
    8. Nadine Gatzert & Thomas Kosub, 2014. "Insurers’ Investment in Infrastructure: Overview and Treatment under Solvency II," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 39(2), pages 351-372, April.
    9. Ben Ammar, Semir & Eling, Martin, 2015. "Common risk factors of infrastructure investments," Energy Economics, Elsevier, vol. 49(C), pages 257-273.
    10. Pekka Leviakangas & Pekka Kess & Jaakko Kujala, 2013. "Investment Analysis in Public-Private-Partnership Projects: Any Common Ground for Public and Private Investors?," Diversity, Technology, and Innovation for Operational Competitiveness: Proceedings of the 2013 International Conference on Technology Innovation and Industrial Management,, ToKnowPress.
    11. Evgenios Tassopoulos & Sotirios Theodoropoulos, 2014. "Residual Value and its Importance in Concession Agreements for Infrastructure Problems," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 32-40.
    12. Zura Kakushadze & Juan Andrés Serur, 2018. "151 Trading Strategies," Springer Books, Springer, number 978-3-030-02792-6, June.
    13. Leviäkangas, Pekka Juhani & Nokkala, Marko Juha Mikael & Talvitie, Antti Petri, 2015. "A slice or the whole cake? Network ownership, governance and public–private partnerships in Finland," Research in Transportation Economics, Elsevier, vol. 49(C), pages 2-13.
    14. Wouter Thierie & Lieven Moor, 2016. "The characteristics of infrastructure as an investment class," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 30(3), pages 277-297, August.
    15. Tanzeem Hasnat, 2021. "Infrastructure Equity and Firm Performance in India," Millennial Asia, , vol. 12(1), pages 97-115, April.
    16. Ron Bird & Harry Liem & Susan Thorp, 2014. "Infrastructure: Real Assets and Real Returns," European Financial Management, European Financial Management Association, vol. 20(4), pages 802-824, September.
    17. Carlos Oliveira Cruz & Joaquim Miranda Sarmento, 2018. "Maximizing the value for money of road projects through digitalization," Competition and Regulation in Network Industries, , vol. 19(1-2), pages 69-92, March.
    18. Bitsch, Florian, 2012. "Do investors value cash flow stability of listed infrastructure funds?," CEFS Working Paper Series 2012-01, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    19. Andrew Ang & Dimitris Papanikolaou & Mark M. Westerfield, 2014. "Portfolio Choice with Illiquid Assets," Management Science, INFORMS, vol. 60(11), pages 2737-2761, November.
    20. Lieve Fransen & Gino del Bufalo & Edoardo Reviglio, 2018. "Boosting Investment in Social Infrastructure in Europe," European Economy - Discussion Papers 074, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    21. Emanuele Rossi & Rok Stepic, 2015. "Infrastructure Project Finance and Project Bonds in Europe," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-137-52404-1, December.
    22. Daniel Wurstbauer & Wolfgang Schäfers, 2015. "Inflation hedging and protection characteristics of infrastructure and real estate assets," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 33(1), pages 19-44, February.
    23. Singh, Kewal & Singh, Anoop & Prakash, Puneet, 2022. "Estimating the cost of equity for the regulated energy and infrastructure sectors in India," Utilities Policy, Elsevier, vol. 74(C).
    24. Diana Dwi Astuti, 2017. "External and Internal Factors Influence to the Return on Equity and Risk Investment in Jakarta Islamic Index (JII)," GATR Journals jmmr162, Global Academy of Training and Research (GATR) Enterprise.
    25. Rajiv Sharma & Eric Knight, 2016. "The Role of Information Density in Infrastructure Investment," Growth and Change, Wiley Blackwell, vol. 47(4), pages 520-534, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wagenvoort, Rien & de Nicola, Carlo & Kappeler, Andreas, 2010. "Infrastructure finance in Europe: Composition, evolution and crisis impact," EIB Papers 1/2010, European Investment Bank, Economics Department.
    2. Engel, Eduardo & Fischer, Ronald & Galetovic, Alexander, 2010. "The economics of infrastructure finance: Public-Private Partnerships versus public provision," EIB Papers 2/2010, European Investment Bank, Economics Department.
    3. Estache, Antonio, 2010. "Infrastructure finance in developing countries: An overview," EIB Papers 8/2010, European Investment Bank, Economics Department.
    4. Inderst, Georg, 2010. "Infrastructure as an asset class," EIB Papers 3/2010, European Investment Bank, Economics Department.
    5. Helm, Dieter, 2010. "Infrastructure and infrastructure finance: The role of the government and the private sector in the current world," EIB Papers 5/2010, European Investment Bank, Economics Department.
    6. Fay, Marianne & Iimi, Atsushi & Perrissin-Fabert, Baptiste, 2010. "Financing greener and climate-resilient infrastructure in developing countries - challenges and opportunities," EIB Papers 7/2010, European Investment Bank, Economics Department.
    7. Stewart, James, 2010. "The UK National Infrastructure Plan 2010," EIB Papers 6/2010, European Investment Bank, Economics Department.
    8. Ayla Ogus & Niloufer Sohrabji, 2008. "On the optimality and sustainability of Turkey’s current account," Empirical Economics, Springer, vol. 35(3), pages 543-568, November.
    9. Baum, Christopher F. & Caglayan, Mustafa & Talavera, Oleksandr, 2010. "Parliamentary election cycles and the Turkish banking sector," Journal of Banking & Finance, Elsevier, vol. 34(11), pages 2709-2719, November.
    10. Theodore Tsekeris & Klimis Vogiatzoglou, 2014. "Public infrastructure investments and regional specialization: empirical evidence from Greece," Regional Science Policy & Practice, Wiley Blackwell, vol. 6(3), pages 265-289, August.
    11. Aysan, Ahmet Faruk & Ceyhan, Şanli Pinar, 2008. "What determines the banking sector performance in globalized financial markets? The case of Turkey," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(7), pages 1593-1602.
    12. Andrea Szalavetz, 2001. "Western policy lessons in the second phase of regional transformation," IWE Working Papers 119, Institute for World Economics - Centre for Economic and Regional Studies.
    13. Aykut Kibritcioglu, 2007. "The Labour Market Implications of Large-Scale Restructuring in the Banking Sector in Turkey," Economics Bulletin, AccessEcon, vol. 28(4), pages 1.
    14. Aysan, Ahmet Faruk & Ceyhan, Sanli Pinar, 2008. "Structural Change and the Efficiency of Banking In Turkey: Does Ownership Matter?," MPRA Paper 17849, University Library of Munich, Germany.
    15. Sami Ben Naceur & Magda Kandil, 2013. "Has The Basel Capital Requirement Caused Credit Crunch In The Mena Region?," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., vol. 5(02), pages 1-33.
    16. Rodríguez-Pose, Andrés & Fratesi, Ugo, 2002. "Unbalanced development strategies and the lack of regional convergence in the EU," ERSA conference papers ersa02p415, European Regional Science Association.
    17. Vasily Astrov & Josef Pöschl & Hermine Vidovic & Julia Wörz, 2005. "Turkey: Macroeconomic Vulnerability, Competitiveness and the Labour Market," wiiw Country Profile 21, The Vienna Institute for International Economic Studies, wiiw.
    18. Norbert Berthold & Michael Neumann, 2005. "Does Germany pay too much? What the New Economic Geography can teach German policy-makers in their the negotiations on the EU budget," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 58(10), pages 16-22, May.
    19. Iveta Repková & Daniel Stavárek, 2014. "Concentration and Competition in the Banking Sector of Turkey," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 16(36), pages 625-625, May.
    20. Selçuk Caner & Süheyla Özyıldırım & A. Ungan, 2012. "How Sensitive Are Bank Managers to Shareholder Value?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 42(3), pages 187-205, December.

    More about this item

    Keywords

    Infrastructure investment; Private equity;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:eibpap:2010_004. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Polyxeni Kanelliadou (email available below). General contact details of provider: https://edirc.repec.org/data/ceeiblu.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.