Institutional Investors and Infrastructure Investing
92 Pages Posted: 24 Sep 2018 Last revised: 15 Mar 2021
Date Written: March 2021
Institutional investors expect infrastructure to deliver long-term stable returns but gain exposure to infrastructure predominantly through finite-horizon closed private funds. The cash flows delivered by infrastructure funds display similar volatility and cyclicality as other private equity investments, and their performance depends similarly on quick deal exits. Despite weak risk-adjusted performance and failure to match the supposed characteristics of infrastructure assets, closed funds have received more commitments over time, particularly from public investors. Public institutional investors perform worse than private institutional investors, and ESG preferences and regulations explain 25-40% of their increased allocation to infrastructure and 30% of their underperformance.
Keywords: Infrastructure, Public Pension Funds, Institutional Investors, ESG regulation
JEL Classification: G11, G23, G28, H54, H75
Suggested Citation: Suggested Citation