EDHEC Infrastructure Institute-Singapore has launched 384 infrastructure debt and equity indexes that make it easier to assess performance and open the door to “multi-trillion dollar increases” in allocations, it claims.
The benchmarks cover 50 percent of the broad market capitalisation of 14 European markets, providing investors with metrics including time-weighted and risk-adjusted returns, value-at-risk, duration, cash yields and a dozen other ways to track how private infrastructure investments are faring. EDHECinfra is aiming to achieve global coverage by 2020, the research institute said.
The indexes are built using asset-level data, garnered from infrastructure projects and relevant corporates. The database aggregates “millions of cashflows and balance sheet items”, the institute added, billing it as “the largest, most comprehensive such database in the world”. French bank Natixis and the Long-Term Infrastructure Investors Association, an industry body, have been supporting the underpinning research since 2012.
“Key asset allocation, prudential regulation or performance attribution questions can now be answered,” said Frédéric Blanc-Brude, EDHECinfra’s director.
Both sets of benchmarks suggest great resilience on the part of the asset class throughout the financial crisis and ensuing eurozone turmoil, with the All Infrastructure Senior Private Debt and the All Infrastructure Private Equity indices both suffering decelerations but no peak-to-trough drop since 2000.
Performance also appears to be sound for the two broadest benchmarks, with the Senior Private Debt index posting a 6.8 percent return over a 10-year period, lower than its historic 8.31 percent performance, but better than the 4.75 percent corporate bond reference. The Private Equity index recorded an 11.88 percent performance over 10 years, slightly above its historic performance and easily beating its public market reference, stuck at 5.72 percent.
Looking at private equity segments, the 10-year performance of merchant infrastructure (14.85 percent) beats contracted (13.7 percent) and regulated (10.37 percent). Counterintuitively, however, the indexes show regulated assets to be more volatile than their merchant counterpart, on a 10-year basis.
Contracted infrastructure appears to be the best-performing segment when looking at senior debt on a pan-European basis.