Blanc-Brude: A roadmap to make long-term infrastructure investment relevant to institutional investors

ABSTRACT:

Institutional investment in infrastructure assets is related to a broader trend to improve portfolio diversification through alternative investments, to invest increasingly outside of capital markets, to find sufficiently long-dated instruments with a more attractive  performance than government bonds, and to invest in inflation-linked securities other than TIPS. One of the most salient feature of these emerging investment choices is the decision to buy assets that are infrequently traded and to hold them until maturity. Below, we highlight a proposed roadmap for the development of long-term institutional investment in unlisted equity, with a focus on infrastructure investment. We argue that substantial investing in unlisted assets creates a demand for performance monitoring that the current delegated model of private equity investment has mostly failed to meet. In response, investors have gradually shifted to direct investment in unlisted equity, but this is unlikely to be a panacea. Instead, a multi-stake holder effort for the development of standardized reporting and benchmarking of unlisted equity investments could preserve the benefits of investment delegation while allowing effective and efficient long-term institutional investment in unlisted infrastructure and other equity portfolios.

 

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