How is the unlisted infrastructure investment universe defined?
Answer
The investment universe relevant to measuring performance in the principal market is defined in two steps:
National-market inclusion: relevant national markets are determined on the basis of national-level index inclusion criteria, including their level of activity (number and frequency of transactions and market participants), relative size, and also minimum data availability.
Individual-company inclusion: within the markets that qualify under these criteria, potential index constituents - whether they are equity or debt issuers - must also meet a set of minimum inclusion criteria. These include suitability for investment, age, and minimum data availability.
This then enables the construction of a sampled universe that meets certain minimum representative criteria, which is then used as the basis for defining the constituents of the global broad market index.
Things to consider
The objective of the Unlisted Infrastructure Universe Standard is to identify the relevant universe to track the fair value and the risk-adjusted performance of the unlisted infrastructure asset class. In this vein, fair value is considered a market-based measurement concerned with how average prices are formed in the most representative markets.
In the terminology of IFRS 13, relevant markets are known the principal (or most advantageous) market. The principal market enables the best possible measurement of average/systematic drivers of prices in unlisted infrastructure investments. Thus, the choice of universe for a broad market reference index aims to include those markets that are representative of the price preferences of independent, knowledgeable and willing buyers and sellers on the measurement date.