Institutional Infrastructure Investment

Infrastructure is increasingly important for institutional investors worldwide. Larger pension funds, public funds, and funds with a larger allocation to alternatives are more likely to invest in infrastructure, and to manage it internally. Smaller pension funds more often use intermediated investment approaches, face higher investment costs, and realize lower returns. We observe economies of scale for pension funds’ investment performance in infrastructure, while financial intermediation does not affect performance significantly. As an institutional investment, infrastructure performed well over the 2007-2018 period, with a 10.1% return, second only to private equity, and a standard deviation of 8.4%, second only to bonds.