Infrastructure: Real Assets and Real Returns
Little empirical work has been done on the return properties of infrastructure as an asset class despite increased allocations by institutional investors. Managers claim infrastructure investments offer real return benefits via a combination of monopolistic and defensive assets. We build a robust factor model of infrastructure returns and estimate the model using U.S. and Australian infrastructure and utility data. We find evidence of excess returns and inflation hedging, but not of defensive characteristics during equity market downturns. We also compare the performance of regulated infrastructure assets to option-based models designed to synthetically replicate infrastructure asset returns, and identify the regulatory risk premium (the premium for government regulation of infrastructure investments). We find that the returns from infrastructure have outperformed option-based replicating strategies over the period from 1995-2009 in Australia, for historical reasons. Finally, we suggest how improved defensive and inflation hedging characteristics can be obtained using a combination of inflation linked bonds and covered call strategies.
|Date of creation:||01 Sep 2011|
|Contact details of provider:|| Postal: PO Box 123, Broadway, NSW 2007, Australia|
Phone: +61 2 9514 7777
Fax: +61 2 9514 7711
Web page: http://www.uts.edu.au/research-and-teaching/our-research/paul-woolley-centre
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fama, Eugene F. & Schwert, G. William, 1977. "Asset returns and inflation," Journal of Financial Economics, Elsevier, vol. 5(2), pages 115-146, November.
- 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).
- Ron Bird & Harry Liem & Susan Thorp, 2010. "Hedge Fund Excess Returns Under Time-Varying Beta," Working Paper Series 9, The Paul Woolley Centre for Capital Market Dysfunctionality, University of Technology, Sydney.
- Eldar Shafir & Peter Diamond & Amos Tversky, 1997. "Money Illusion," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 341-374.
- Alex Robson, 2005. "Rent Seeking and the Presence of Existing Distortions," ANU Working Papers in Economics and Econometrics 2005-448, Australian National University, College of Business and Economics, School of Economics.
- 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.
- Gary Gorton & K. Rouwenhorst, 2004.
"Facts and Fantasies about Commodity Futures,"
Yale School of Management Working Papers
amz2619, Yale School of Management, revised 01 Mar 2005.
- repec:arz:wpaper:eres2007-154 is not listed on IDEAS
- Ron Bird & Harry Liem & Susan Thorp, 2011. "Private Equity: Strategies for Improving Performance," Working Paper Series 12, The Paul Woolley Centre for Capital Market Dysfunctionality, University of Technology, Sydney.
- Georg Inderst, 2009. "Pension Fund Investment in Infrastructure," OECD Working Papers on Insurance and Private Pensions 32, OECD Publishing.
- Ludovic Phalippou, 2009. "Beware of Venturing into Private Equity," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 147-166, Winter.
- Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
When requesting a correction, please mention this item's handle: RePEc:uts:pwcwps:11. 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: (Duncan Ford)
If references are entirely missing, you can add them using this form.