The Investment Characteristics of OECD Infrastructure: A Cash-Flow Analysis

Abstract

Sufficient reliable data on private market total returns do not exist for infrastructure investments, which makes it difficult to assess the performance of infrastructure through macroeconomic cycles. In this article, using 27 years of historical EBITDA data (1986–2012) for 229 mature infrastructure assets across six sub-sectors in the United States and Western Europe, the authors explore cash-flow growth rates generated by infrastructure, real estate, and corporations to provide important insights into the investment performance of infrastructure. The results demonstrate that the volatility of infrastructure cash flows is materially lower than, and not highly correlated with, those of real estate and equities. Further, infrastructure cash flows outpaced CPI inflation and GDP growth during the past three recessions. Finally, diversification opportunities exist across infrastructure sub-sectors and geographies.

Keywords: Cash-Flow Analysis, Diversification, EBITDA, Infrastructure, Pension Fund, Volatility