- October 1, 2015: Vol. 2, Number 10

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Look Before You Leap: Measuring infrastructure fund performance can be more art than science

by Sheila Hopkins

For investors, being able to benchmark their performance is crucial. They do not need to outperform the benchmark — though they always hope to — but they certainly do not want to do worse than the market. In addition, benchmarks help investors pinpoint the areas of a diversified asset class that fit the risk-return parameters for their portfolios.

Despite growing interest in the infrastructure asset class, however, no standard exists for benchmarking the performance of unlisted or, to a lesser extent, listed infrastructure investments.

A 2012 CFA Institute report — Benchmarks for Unlisted Infrastructure — surveyed 10 long-time, active infrastructure investors on what they used for a benchmark. Turns out that two institutions used absolute real return approaches. Two used simple CPI-plus approaches. Two used CPI plus bond and equity premiums. One used a fixed-income index. Three used hybrid approaches, each with different components, weight

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