Can we apply the same factor analysis to calculate the Equity Risk Premia for listed infrastructure assets?

Answer

Listed infrastructure has been shown to have a near perfect correlation with stock markets and as such carry different risk characteristics than unlisted infrastructure. Our paper titled “The Rise of Fake Infra” covers this phenomenon; existing listed infrastructure indices and products usually include many other types of firms that are not infrastructure, referred to as fake infra. Thus, it follows that listed infrastructure indices and products have been shown time and again to be highly correlated with listed equities and to have a similar risk and drawdown profile.

Given our multi-factor model has been specifically calibrated for the unlisted infrastructure universe, we would not suggest that the the risk factors for unlisted infrastructure can be directly applied to listed infrastructure assets.