The Subsidy to Infrastructure as an Asset Class

48 Pages Posted: 17 Sep 2018 Last revised: 8 Jun 2022

See all articles by Aleksandar Andonov

Aleksandar Andonov

University of Amsterdam

Roman Kräussl

Universite du Luxembourg - Department of Finance; Hoover Institution, Stanford University

Joshua D. Rauh

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

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Date Written: September 2018


We investigate the characteristics of infrastructure as an asset class from an investment perspective of a limited partner. While non U.S. institutional investors gain exposure to infrastructure assets through a mix of direct investments and private fund vehicles, U.S. investors predominantly invest in infrastructure through private funds. We find that the stream of cash flows 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. U.S. public pension funds perform worse than other 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, U.S. public pension funds have created an implicit subsidy to infrastructure as an asset class, which we estimate within the range of $730 million to $3.16 billion per year depending on the benchmark.

Suggested Citation

Andonov, Aleksandar and Kraeussl, Roman and Rauh, Joshua D., The Subsidy to Infrastructure as an Asset Class (September 2018). NBER Working Paper No. w25045, Available at SSRN:

Aleksandar Andonov (Contact Author)

University of Amsterdam ( email )

Plantage Muidergracht 12
Amsterdam, 1018 TV


Roman Kraeussl

Universite du Luxembourg - Department of Finance ( email )

L-1511 Luxembourg

Hoover Institution, Stanford University ( email )

Stanford, CA 94305
United States

Joshua D. Rauh

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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