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The characteristics of infrastructure as an investment class

Author

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  • Wouter Thierie

    (Vrije Universiteit Brussel)

  • Lieven Moor

    (Vrije Universiteit Brussel)

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
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    References listed on IDEAS

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    More about this item

    Keywords

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

    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

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