Risk, Return and Cash Flow Characteristics of Infrastructure Fund Investments

EIB Papers, Vol. 15, No. 1, pp. 106-136, 2010

32 Pages Posted: 29 Jan 2012

See all articles by Florian Bitsch

Florian Bitsch

Technische Universität München - Center for Entrepreneurial and Financial Studies

Axel Buchner

University of Passau; CEPRES - Center of Private Equity Research

Christoph Kaserer

Technische Universität München (TUM)

Date Written: 2010

Abstract

We analyze the risk, return and cash flow characteristics of infrastructure investments by using a unique dataset of deals done by private equity-like investment funds. We show that infrastructure deals have a performance that is higher than that of noninfrastructure deals, despite lower default frequencies. However, we do not find that infrastructure deals offer more stable cash flows. Our study offers some evidence in favour of the hypothesis that higher infrastructure returns could be driven by higher market risk. In fact, these investments appear to be highly levered and their returns are positively correlated to publicequity markets, but uncorrelated to GDP growth. Our results also indicate that returns could be influenced by the regulatory framework as well as by defective privatization mechanisms. By contrast, returns are neither linked to inflation nor subject to the “money chasing deals” phenomenon.

Keywords: infrastructure investment, infrastructure fund, risk, return

JEL Classification: G23, G24

Suggested Citation

Bitsch, Florian and Buchner, Axel and Kaserer, Christoph, Risk, Return and Cash Flow Characteristics of Infrastructure Fund Investments (2010). EIB Papers, Vol. 15, No. 1, pp. 106-136, 2010. Available at SSRN: https://ssrn.com/abstract=1992961

Florian Bitsch (Contact Author)

Technische Universität München - Center for Entrepreneurial and Financial Studies

Arcisstr. 21
Munich, 80333
Germany
+49.89.28925440 (Phone)

HOME PAGE: http://www.cefs.de

Axel Buchner

University of Passau ( email )

Innstraße 27
Passau, 94030
Germany

CEPRES - Center of Private Equity Research ( email )

Max-Joseph-Strasse 7
Munich, 80333
Germany

Christoph Kaserer

Technische Universität München (TUM) ( email )

Arcisstr. 21
Munich, D-80290
Germany
+49 89 289 25489 (Phone)
+49 89 289 25488 (Fax)

HOME PAGE: http://www.cefs.de

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