IDEAS home Printed from https://ideas.repec.org/a/kap/fmktpm/v30y2016i3d10.1007_s11408-016-0273-9.html
   My bibliography  Save this article

The characteristics of infrastructure as an investment class

Author

Listed:
  • Wouter Thierie

    () (Vrije Universiteit Brussel)

  • Lieven Moor

    () (Vrije Universiteit Brussel)

Abstract

Abstract There is an enormous need for infrastructure investment. Although institutional savings has shown strong growth in the OECD countries since the mid-2000s, only a small proportion of institutional assets is allocated to infrastructure. Relatively little is known about the characteristics and risk–return profiles of infrastructure assets, making institutional investors reluctant to step up investing in this type of asset. There is a wide heterogeneity in risk–return characteristics across sectors, regions, and stage of development, creating an uncertainty that explains why the flow of funds from institutional investors toward infrastructure does not reach its full potential. However, infrastructure provides significant diversification benefits that justify increased investment. Moreover, the financial crisis led to a growing interest in infrastructure as a tool for portfolio diversification among various asset classes. The goal of this paper is to review the characteristics of infrastructure as an investment class. The paper will be useful for academics looking for topics of research in the field, and will be of practical use to institutional investors considering infrastructure investment opportunities.

Suggested Citation

  • 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.
  • Handle: RePEc:kap:fmktpm:v:30:y:2016:i:3:d:10.1007_s11408-016-0273-9
    DOI: 10.1007/s11408-016-0273-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11408-016-0273-9
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lars-Hendrik Roller & Leonard Waverman, 2001. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," American Economic Review, American Economic Association, vol. 91(4), pages 909-923, September.
    2. Clara Severinson & Juan Yermo, 2012. "The Effect of Solvency Regulations and Accounting Standards on Long-Term Investing: Implications for Insurers and Pension Funds," OECD Working Papers on Finance, Insurance and Private Pensions 30, OECD Publishing.
    3. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    4. Steven N. Kaplan & Antoinette Schoar, 2005. "Private Equity Performance: Returns, Persistence, and Capital Flows," Journal of Finance, American Finance Association, vol. 60(4), pages 1791-1823, August.
    5. Soosung Hwang & Pa Mitchell & Soosung Hwang & Paul Mitchell, 2007. "Will Private Equity and Hedge Funds Replace Real Estate in Mixed-Asset Portfolios?," ERES eres2007_154, European Real Estate Society (ERES).
    6. Bianchi, Robert J. & Bornholt, Graham & Drew, Michael E. & Howard, Michael F., 2014. "Long-term U.S. infrastructure returns and portfolio selection," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 314-325.
    7. Georg Inderst, 2009. "Pension Fund Investment in Infrastructure," OECD Working Papers on Insurance and Private Pensions 32, OECD Publishing.
    8. Athena Panayiotou & Francesca Medda, 2014. "Attracting private sector participation in infrastructure investment: the UK case," Public Money & Management, Taylor & Francis Journals, vol. 34(6), pages 425-431, November.
    9. repec:arz:wpaper:eres2007-154 is not listed on IDEAS
    10. Torsten Ehlers, 2014. "Understanding the challenges for infrastructure finance," BIS Working Papers 454, Bank for International Settlements.
    11. 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.
    12. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2010. "The economics of infrastructure finance: Public-private partnerships versus public provision," Documentos de Trabajo 276, Centro de Economía Aplicada, Universidad de Chile.
    13. Joseph B. Oyedele & Alastair Adair & Stanley McGreal, 2014. "Performance of global listed infrastructure investment in a mixed asset portfolio," Journal of Property Research, Taylor & Francis Journals, vol. 31(1), pages 1-25, March.
    14. 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.
    15. Raffaele Della Croce & Juan Yermo, 2013. "Institutional Investors and Infrastructure Financing," OECD Working Papers on Finance, Insurance and Private Pensions 36, OECD Publishing.
    16. Tobias Dechant & Konrad Finkenzeller, 2013. "How much into infrastructure? Evidence from dynamic asset allocation," Journal of Property Research, Taylor & Francis Journals, vol. 30(2), pages 103-127, June.
    17. Inderst, Georg, 2013. "Private infrastructure finance and investment in Europe," EIB Working Papers 2013/02, European Investment Bank (EIB).
    18. 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.
    19. Olivier Mareuse, 2011. "Fostering Long-term Investment and Economic Growth: A Long-term Investor's View," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2011(1), pages 83-86.
    20. 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.
    21. Joseph B. Oyedele & Alastair Adair & Stanley McGreal, 2014. "Performance of global listed infrastructure investment in a mixed asset portfolio," Journal of Property Research, Taylor & Francis Journals, vol. 31(1), pages 1-1, March.
    22. Dieter Helm & Tom Tindall, 2009. "The evolution of infrastructure and utility ownership and its implications," Oxford Review of Economic Policy, Oxford University Press, vol. 25(3), pages 411-434, Autumn.
    23. 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.
    24. Gert Wehinger, 2011. "Fostering Long-term Investment and Economic Growth Summary of a High-Level OECD Financial Roundtable," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2011(1), pages 9-29.
    25. Inderst, Georg, 2010. "Infrastructure as an asset class," EIB Papers 3/2010, European Investment Bank, Economics Department.
    26. Frederic Blanc‐Brude & Roger Strange, 2007. "How Banks Price Loans to Public‐Private Partnerships: Evidence from the European Markets," Journal of Applied Corporate Finance, Morgan Stanley, vol. 19(4), pages 94-106, September.
    27. Gian Luigi Costanzo, 2011. "The Contribution of the Asset Management Industry to Long-term Growth," OECD Journal: Financial Market Trends, OECD Publishing, vol. 2011(1), pages 87-96.
    28. Doru-Cristian CORETCHI & Marian-Adrian GROSU, 2011. "The Financing of Public - Private Partnership (Ppp) Projects in Romania - An Evaluation of the Awareness and Know-How among Romanian Organizations," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 1(4), pages 1-12, June.
    29. Luke R. Hartigan & Ritesh Prasad & Anthony J. De Francesco, 2010. "Constructing an investment return series for the UK unlisted infrastructure market: estimation and application," Journal of Property Research, Taylor & Francis Journals, vol. 28(1), pages 35-58, September.
    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. Louis Chakkalakal & Ulrich Hommel & Wenwei Li, 2018. "Transport infrastructure equities in mixed-asset portfolios: estimating risk with a Garch-Copula CVaR model," Journal of Property Research, Taylor & Francis Journals, vol. 35(2), pages 117-138, April.

    More about this item

    Keywords

    Infrastructure; Portfolio diversification; Asset allocation; Institutional investor; Pension fund; Risk return; Life cycle; Investment opportunity;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • 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

    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:kap:fmktpm:v:30:y:2016:i:3:d:10.1007_s11408-016-0273-9. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Springer Nature Abstracting and Indexing). General contact details of provider: http://www.springer.com .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.