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Risk, return and cash flow characteristics of infrastructure fund investments

  • Bitsch, Florian


    (Technische Universität München)

  • Buchner, Axel


    (Technische Universität München)

  • Kaserer, Christoph


    (Technische Universität München)

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.

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Paper provided by European Investment Bank, Economics Department in its series EIB Papers with number 4/2010.

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Length: 32 pages
Date of creation: 17 Dec 2010
Date of revision:
Handle: RePEc:ris:eibpap:2010_004
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  1. Philippe Martin, 1999. "Are European regional policies delivering?," Sciences Po publications info:hdl:2441/9343, Sciences Po.
  2. 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.
  3. Fidrmuc, Jan, 2001. "Democracy in transition economies: Grease or sand in the wheels of growth?," ZEI Working Papers B 09-2001, ZEI - Center for European Integration Studies, University of Bonn.
  4. Ferreira, Luisa & Vanhoudt, Patrick, 2002. "Catching The Celtic Tiger By Its Tail," Economic and Financial Reports 2002/1, European Investment Bank, Economics Department.
  5. Rossi, Alessandro & Canpolongo, Francesca & Bichisao, Guido, 2002. "Hedge Accounting Within Ias 39," Economic and Financial Reports 2002/2, European Investment Bank, Economics Department.
  6. Valila, Timo & Mehrotra, Aaron, 2005. "Evolution And Determinants Of Public Investment In Europe," Economic and Financial Reports 2005/1, European Investment Bank, Economics Department.
  7. Hurst, Christopher & Uppenberg, Kristian, 2000. "Investment Issues In South-Eastern Europe," Economic and Financial Reports 2000/2, European Investment Bank, Economics Department.
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