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OUR ECONOMY

Infrastructure Indices: Comparative Analysis of Performance, Risk and Representation of Global Listed Proxies

Dimitar Lambrev

Abstract


Faced with historically low interest rates, investors are looking further into illiquid
assets such as infrastructure in search of alternative sources of income, better
diversification and a long-term investment perspective. This paper analyzes the key
performance and risk characteristics of the EDHECinfra global unlisted infrastructure
equity index when compared to the main global listed infrastructure indices during
the 2001-2018 period. The descriptive statistics method is applied to determine
the representation of the benchmarks commonly used by investors considering
infrastructure investments. For the purpose of the market beta analysis, the MSCI
World index is also used as a global equities proxy in a linear regression model.
Listed infrastructure is often considered as an income-yielding and defensive
equity strategy that provides a liquid proxy for alternative assets (e.g.,
infrastructure). However, the paper results indicate that the net effect of investing
in listed infrastructure remains questionable, even unknown. Recent empirical
findings demonstrate divergent stands on benchmarking infrastructure. The
high correlation of the main listed infrastructure indices with the broad equity
index MSCI World and the inconsistency of research results thus far suggest that
infrastructure is an ill-defined investment category within the listed infrastructure
space with lacking reliable and useful benchmarking. The commonly used
and far-reaching classification of companies with broad industrial nature and
business activities that are less relevant to infrastructure may affect the overall
representation of the legitimate characteristics of the infrastructure asset class
amid the growing enthusiasm among investors.


Keywords


infrastructure, index, benchmarking, listed equity, performance analysis

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