Rising interest rates do impact infrastructure investments, but the effect depends on what originally caused the spike in interest rates and the duration of the increase, according to Tania Tsoneva, senior director, global infrastructure research, for CBRE Investment Management. In a report, Infrastructure in rising interest rate environments, which was published in the November issue of Institutional Investment in Infrastructure, Tsoneva discusses the nuances in the relationship between infrastructure and interest rates. “The two most obvious reasons why rates matter are financing costs and the impact of discount rates on valuations,” explains Tsoneva. “Duration measures the sensitivity to interest rates, and the present value of assets with longer-term cash flows, by definition, is more sensitive to shifts in market discount rates.” To access a pdf of the interview, click here.
