Institutional Investors and Infrastructure Investing

Author:

Andonov Aleksandar1,Kräussl Roman2,Rauh Joshua3

Affiliation:

1. University of Amsterdam and CEPR

2. University of Luxembourg and Hoover Institution, Stanford University

3. Stanford Graduate School of Business, Hoover Institution, and NBER

Abstract

Abstract Institutional investors expect infrastructure to deliver long-term stable returns but gain exposure to infrastructure predominantly through finite-horizon closed private funds. The cash flows delivered by infrastructure funds display similar volatility and cyclicality as other private equity investments, and their performance similarly depends on quick deal exits. Despite weak risk-adjusted performance and failure to match the supposed characteristics of infrastructure assets, closed funds have received more commitments over time, particularly from public investors. Public institutional investors perform worse than private institutional investors. ESG preferences and regulations explain 25$\%$–40$\%$ of their increased allocation to infrastructure and 30$\%$ of their underperformance.

Publisher

Oxford University Press (OUP)

Subject

Economics and Econometrics,Finance,Accounting

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