EDHEC Infrastructure Institute on June 7 launched global benchmark indexes for unlisted infrastructure equity and debt that market veterans say could pave the way for more efficient allocations to the fast-growing asset class.
The first performance data for unlisted infrastructure equity EDHECinfra released showed returns for the year through March 31, including leverage, of 11.6%, slipping from annualized three-year returns of 12.6% and five-year returns of 14.1%.
The indexes, built on 20 years of data on 600 private companies collected by EDHECinfra's staff over the past four years, will position investors for a "quantum leap" when it comes to measuring risk-adjusted returns in infrastructure, said Frederic Blanc-Brude, director of both the institute and EDHEC Asia-Pacific.
EDHECinfra's database, which Mr. Blanc-Brude figures is as least four or five times deeper than its nearest rival, will allow investors to model cash flows, calibrate discount rates and measure the volatility of returns as well as gauge the impact of factors such as size, leverage and sector on outcomes, he said.
Current benchmarks, focused mostly on internal rates of return, have proven wanting, Mr. Blanc-Brude said in a May 30 interview. An EDHECinfra survey of roughly 130 asset owners, released in April, showed most using target return hurdles or listed infrastructure indexes as proxies for a benchmark, even as 90% expressed dissatisfaction with their choices.
Global infrastructure assets under management totaled $491 billion as of June 2018, up 9.8% from the prior year, according to Preqin data. Seventy-four funds raised $93 billion in infrastructure funds worldwide in 2018, up from 82 funds that closed on $47 billion in 2014.
In a sector where big institutional investors often make chunky investments in airports, power plants, toll roads, wind farms or container terminals, infrastructure managers and asset owners alike concede the challenges of putting together a benchmark that aids portfolio construction are daunting.