The Subsidy to Infrastructure as an Asset Class

59 Pages Posted: 24 Sep 2018 Last revised: 2 Jun 2019

See all articles by Aleksandar Andonov

Aleksandar Andonov

University of Amsterdam

Roman Kräussl

Luxembourg School of Finance; Hoover Institution, Stanford University

Joshua D. Rauh

Stanford Graduate School of Business; Hoover Institution; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2019


We investigate the characteristics of infrastructure as an asset class from the perspective of a limited partner. The stream of cash flows and riskiness of performance delivered by private infrastructure funds to institutional investors is very similar to that delivered by other types of private equity, as reflected by the frequency and amounts of net cash flows as well as by the volatility of performance measures. Public investors, such as public pension funds, government agencies, and sovereign wealth funds perform worse than private institutional investors in their infrastructure fund investments, although they are exposed to underlying deals with very similar project stage, concession terms, ownership structure, industry, and geographical location. By selecting funds that invest in projects with poor financial performance, public investors have created an implicit subsidy to infrastructure as an asset class, which we estimate at a minimum of $1.3-$1.5 billion per year if the alternative opportunity is the S&P 500 or real estate funds, $3.3 billion per year if compared to listed infrastructure funds, and $8.5 billion per year if compared to private equity buyout funds. The public subsidy is not primarily driven by local investments.

Keywords: Infrastructure, Public Pension Funds, Institutional Investors

JEL Classification: G11, G23, G28, H54, H75

Suggested Citation

Andonov, Aleksandar and Kraeussl, Roman and Rauh, Joshua D., The Subsidy to Infrastructure as an Asset Class (May 2019). Stanford University Graduate School of Business Research Paper No. 18-42. Available at SSRN: or

Aleksandar Andonov

University of Amsterdam ( email )

Plantage Muidergracht 12
Amsterdam, 1018 TV


Roman Kraeussl

Luxembourg School of Finance ( email )

4, rue Albert Borschette
Luxembourg, 1246
+3524666445442 (Phone)


Hoover Institution, Stanford University ( email )

Stanford, CA 94305
United States

Joshua D. Rauh (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Hoover Institution ( email )

Stanford, CA 94305-6010
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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