The coronavirus crisis is forcing investors to rethink risk for an infrastructure asset class many had come to see as an alternative source of the steady yields once provided by government bonds.
Whether that review results in tweaks or more material adjustments will depend on how long the crisis lasts and how deep the economic downturn proves, market participants say.
Reviews for the March 31 quarter will find many asset owners reporting negative returns for their infrastructure holdings — a painful, if temporary, surprise, said Frederic Blanc-Brude, the director of Singapore-based infrastructure benchmark provider EDHECinfra and EDHEC Asia-Pacific.
The point of interest will be how investors' understanding of risk changes in the aftermath of the COVID-19 pandemic, and what they will do as a result in diversifying their infrastructure exposures, Mr. Blanc-Brude said.
"It's a good time for investors to question the assumptions they might have been making (to ensure) they're adapted to the new world that we now live in," said Raphael Arndt, chief investment officer of Australia's A$162.3 billion ($103.2 billion) Future Fund, Melbourne.
For example, in a world where unemployment in many countries could climb to 10% or 20%, it's worth considering "the capabilities of those populations to support essential utility bills under current regulatory arrangements," Mr. Arndt said in an April 27 update of the fund's latest results.