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Daniel Schmidt, CEPRES

Unlisted infrastructure can act as a hedge for corporate bonds, says CEPRES

Private unlisted infrastructure can act as a hedge for corporate bonds, while significantly outperforming on returns, according to a report by CEPRES.

Using PE.Analyzer to analyse thousands of privately held Infrastructure assets, CEPRES found that since 2002 there was a beta (co-movement) to the US corporate bond market of -0.9 and an alpha of 19.5 per cent.
The results were derived from the new PE.Analyzer Alpha Beta Framework that uses regression analysis to calculate the risk adjusted return (alpha), together with the correlation (beta) to an underlying market – in this case US corporate bonds.
“Infrastructure, as a yielding asset, can be a useful alternative for liability driven fixed income investors, like pensions and insurers seeking higher returns,” says Daniel Schmidt (pictured), CEO, CEPRES. “For those especially worried about volatility and downward pressure on public markets, PE.Analyzer shows that private infrastructure can help hedge risk and enhance a balanced portfolio. We also saw how energy infrastructure increased returns, but at the cost of cyclicity. This may suit alpha driven investors, but introduce some risk that should be analysed in the context of a complete asset allocation. Further variations for other sub-segments and comparison to other markets can all be done in PE.Analyzer.”

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