Investor demand for infrastructure investments continues to grow, but performance of publicly traded infrastructure equities (Listed Infrastructure or LI) has recently lagged behind the broader U.S. equity markets. As a result, some infrastructure investors are seeking above-market returns through allocations to private equity funds, creating an additional potential problem of an unsustainable amount of “dry powder,” ultimately potentially leading to disappointing LI returns due to fewer investment opportunities and increased risks to LI from a liquidity perspective.
In this paper, we explore several key questions regarding LI, including:
• What factors have led to the outperformance of LI in prior historical periods?
• What issues have caused LI returns to lag recent performance of the broader market?
o Can these issues be fixed? and
o If so, how do you fix these issues without changing the historical favorable investment attributes of LI?