i3 senior editor Drew Campbell recently spoke with Frederic Blanc-Brude, director of EDHEC Infrastructure Institute, about the state of benchmarks in infrastructure investing. Below are excerpts from their conversation.
What benchmarks are investors using, and for what purposes? What is their satisfaction level with existing benchmarks? Are there areas for improvement?
We surveyed a large sample of the investment community ($10 trillion of assets under management and 130 asset owners) earlier this year about the benchmarks they use for infrastructure investment asset allocation, performance monitoring and risk management. The vast majority — 70 percent — of investors reported using “absolute return” benchmarks of the risk-free or inflation plus 400- or 500-basis-point variety. The remainder uses a listed proxy like the listed infrastructure or real estate equity indices that have been shown to have a very strong correlation with the stock mark