Deutsche Bank research warns against allocations to infrastructure
Infrastructure is a rapidly growing asset class, set to benefit from increasing government stimulus over the next decade. At first glance it provides an additional, uncorrelated, risk premium which is highly attractive to pension fund asset allocators and other long-term investors.
It's not difficult to find reports which set out the why and how of making an allocation to infrastructure. But it's rare to find a contrarian report, like this one from DB, which argues that pension funds should avoid the asset class altogether.
Why you should not invest in infrastructure (Deutsche Bank, Oct 2016)
Pension funds, life insurers and other long-term investors have a long-term time horizon and steady long-term cash flows, making them ideal investors in infrastructure projects. However, this report from Deutsche Bank argues that this solution is wrong on multiple fronts. The authors argue that the attractive risk-return profile for the infrastructure asset class is over-stated, the inherent risks are misunderstood and the lack of mark-to-market valuations is problematic.
Building a Case for Global Infrastructure (GSAM, Oct 2016)
This paper by Goldman Sachs explains the characteristics of the infrastructure asset class and provides some key considerations for investors.
Global Alternatives Survey 2016 (Willis Towers Watson)
This comprehensive 99-page document examines current trends in ten different alternative asset classes including hedge funds, private equity, infrastructure, real estate, illiquid credit and insurance-linked securities. The survey reveals how the preferences for alternative assets vary between different types of asset owner, and lists the top alternative asset managers within each category.
Global Listed Infrastructure: A Case for Investing (CBRE, 2016)
Listed infrastructure has a history of volatility and healthy returns, providing an increased level of liquidity versus private-market investments, and transparency. This paper explores the asset class in more detail.
Allocating capital to illiquid assets - the best papers
Allocating capital to illiquid assets is the preserve of investors who are able to take a long-term view. In theory, the payback for being unable to access capital is a higher expected return. The papers in this blog post explore this in more detail.
European Infrastructure Investors Survey 2016 (Deloitte)
This 28-page paper by Deloitte provides important insights and analysis into the current state and outlook for European infrastructure investment markets.
Infrastructure Rising - An Asset Class Takes Shape (BlackRock, 2015)
This 14-page paper by BlackRock examines the demand for infrastructure investments and a broad overview of the opportunity set and how to navigate it.
Pension Fund Investment in Infrastructure: Lessons from Australia and Canada
Canadian and Australian pension funds have been the trailblazers of infrastructure investment since the 1990s. This paper explores how other investors can learn from their experiences.