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Infrastructure: Real Assets and Real Returns

Author

Listed:
  • Ron Bird
  • Harry Liem
  • Susan Thorp

Abstract

Little empirical work has been done on infrastructure as an asset class despite increased allocations by institutional investors. We build a robust factor model of infrastructure returns using US and Australian infrastructure and utility data to test manager claims that infrastructure investments offer benefits via a combination of monopolistic and defensive assets. We find evidence of excess returns and inflation hedging, but not of defensive characteristics. We compare option†based models designed to replicate infrastructure asset returns, and identify the regulatory risk premium. A combination of inflation linked bonds and covered call strategies results in improved defensive and inflation hedging characteristics.

Suggested Citation

  • 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.
    • Handle: RePEc:bla:eufman:v:20:y:2014:i:4:p:802-824
    DOI: 10.1111/j.1468-036X.2012.00650.x
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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