Assessing private infrastructure in a multi-asset-class portfolio

by Michael Hayes and Yang Liu

The complete report, which was published in August 2021, is available at

https://www.msci.com/www/blog-posts/assessing-private/02673389210.

Excerpt:

Private-infrastructure assets are often considered to act as inflation-hedged high-income bonds, whose risk and correlation can be modeled using the returns from smoothed, lagged valuations or investment-grade public bonds.

This view implies very low betas and hurdle rates for inclusion in the total plan, which are key elements in the asset-allocation decision. Accounting for the heterogeneity of infrastructure assets, private risk premia and reporting bias may reveal higher volatility and correlations that may change allocators’ views on the role of infrastructure in the total plan.

Private infrastructure is a popular and growing element of institutional capital allocations.