Benchmarking, in an era of increased focus on risk, is starting to encompass all areas of institutional portfolios. The latest to get the academic treatment is the growing area of infrastructure investments.
The international research body EDHEC-Risk Institute announced last week the establishment of a research chair which will involve three senior researchers from the institute’s Singapore campus in a three-year study. The chair is financially supported by Meridian Infrastructure, a fund manager, and Campbell Lutyens, a specialist advisory firm.
The first paper from the enterprise is: “Towards Efficient Benchmarks of Infrastructure Equity Investments”. The paper argues that new benchmarking efforts are necessary to create investment solutions that align expectations and observed investment performance in infrastructure equity.
One big pension fund which has braved a frontier path in benchmarking its infrastructure and private equity investments is the Canadian Pension Fund. The fund sets up a bespoke benchmark, using the listed industry subsets of the sharemarket, or GICs, as a guide for every individual unlisted investment of each of its managers. Most funds tend to take an absolute return attitude to infrastructure investments, looking for the cash rate plus a certain percentage, and expecting a similar volatility to bonds.