Publications

- February 1, 2020: Vol. 13, Number 2

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Mastering midmarket diversification: A mix of factors make true diversification particularly complex in the infrastructure arena

by James Wallace

Investment diversification has become almost a platitude among investors, espoused with such casual frequency as to undermine the complexity required. Within infrastructure portfolios, true diversification is particularly complex due to, among other things, the sector’s bulky-sized assets, long-duration deal horizons, political variability, as well as high fixed transaction costs.

While a desirable investment objective, diversification in infrastructure comes at a cost due. Most infrastructure funds make between six and 12 investments in their lifetime, according to EDHECinfra, the academic research and performance benchmarks provider for infrastructure investments, and asset owners favoring so-called direct investments tend to make large transactions and to own between a dozen and a few dozen infrastructure assets. Indeed, even a limited level of infrastructure diversification is no trivial undertaking.

Infrastructure managers have sought to delineate their expertis

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