Portfolio of Infrastructure Investments: Analysis of European Infrastructure

Abstract

Infrastructure is receiving much attention in recent years. Investing in infrastructure is particularly effective and suggested for institutional investors such as pension funds due to the characteristics of infrastructure assets. However, robust analytical and empirical analyses that support these investments are limited due mainly to scant empirical data. In this work by collecting relevant data sets on infrastructures, we address two objectives. First, we examine the significance of listed infrastructure sectors and sub-sectors by assessing the investment characteristics and performance of different infrastructure indexes in Europe. The aim here is to determine how an effective and successful infrastructure portfolio should be constructed. Our second objective is to evaluate the strategy of infrastructure investors, in other words, if the investor should invest in a portfolio containing different infrastructure sectors or whether it is still possible to obtain diversification benefits by investing in only a single infrastructure sector.

The performance of renewable energy infrastructure

“…Only Marzuki and Newell (2021a) have considered the infrastructure subsectors, focusing on the satellite and telecommunications infrastructure subsectors to highlight the investment attributes of the underlying infrastructure subsectors, especially that of the emerging infrastructure subsectors that exist in a niche environment and are driven by unique drivers of demand and performance. This issue is also partly addressed in a pan-European infrastructure study by Panayiotou and Medda (2016), in which they evaluated the performance and value enhancement role of European listed infrastructure subsectors. Despite the worldwide significance of infrastructure as an asset investment class, the investment characteristics of the global infrastructure subsectors are yet to be fully researched.…”

Listed Infrastructure Assets as a Tool for Diversification

“…Many research papers use unrefined methods to argue the case. Studies including (Oyedele, 2014;Oyedele et al, 2013Oyedele et al, , 2014, (Newell & Marzuki, 2016, (Dechant & Finkenzeller, 2013;Finkenzeller et al, 2010) and (Panayiotou & Medda, 2016) employ simple methodologies to show the inclusion brings diversification benefits and risk-adjusted return enhancement. An obvious caveat in them is that the inclusion should most certainly shift the efficient frontier and the conclusions thus derived are trivial.…”

Optimal Portfolio Strategy for Risk Management in Toll Road Forecasts and Investments

“…Given that the project finance landscape changes quite dynamically and as new capital and risk-sharing instruments emerge in urban toll road projects, planners and investors may not always conform to the rationality assumptions of the MPT, such as inherent risk averseness. Additional insights may be borrowed from behavioral finance to design assorted portfolios applicable in different contexts, along with more innovative portfolio optimization strategies for toll road assets (23).…”