The volatility of infrastructure equity investments is the risk investors take to receive a reward for holding such assets. Therefore, a robust measure of risk and its drivers is an essential part of the inclusion of infrastructure investments in the portfolio, from strategic asset allocation, to risk management and reporting, to manager compensation, according to a new study by EDHECinfra.
However, measuring this risk is difficult because the only available data is often limited and typically reports unrealistic total return volatility. In the recent paper, EDHECinfra examines the drivers of the volatility of unlisted infrastructure equity investments and the reasons why the market prices of such investments can and do vary over time.
In this paper, EDHECinfra concludes that with adequate and reliable measures of volatility, infrastructure can be addressed from a total portfolio perspective (strategic allocation) and from a prudential perspective (e.g., Solvency-II) u
