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Infrastructure Outperforms: An Analysis of Markets since the Global Financial Crisis

by Darren Fernandes

  • 07 Mar 2016
  • PE
  • INF

The PrEQIn Infrastructure Quarterly Index can be used as a method for measuring infrastructure performance over a defined period of time. The index captures the average return earned by investors in their infrastructure portfolios, based on the actual amount of money invested. The PrEQIn Infrastructure Index and the PrEQIn All Private Equity Strategies Index are calculated on a quarterly basis using data from Preqin’s Infrastructure Online and Private Equity Online services respectively. The S&P 500 TR Index has also been included to compare both asset classes against the public market.

Rebasing the index as of 31 December 2007 allows us to compare the performance of infrastructure and all private equity strategies from the onset of the Global Financial Crisis (GFC). As markets first began reacting to the sub-prime crisis, the All Private Equity Strategies Index experienced five consecutive quarters of decline, reaching a low of 73.3 by the end of the first quarter of 2009. Throughout the same period the S&P 500 TR Index followed a similar trend, ending the period at 56.1, highlighting the greater rate of decline felt in the public markets compared to alternative investments.

Conversely, the PrEQIn Infrastructure Index enjoyed three quarters of growth up to the end of Q3 2008, before declining to a low of just 93.7 index points 12 months later. The contrast in performance during this period highlights infrastructure’s low correlation with other asset classes, in particular the public markets, emphasizing the value infrastructure can provide in diversifying investor portfolios.

The PrEQIn Infrastructure Index returned to pre-recession levels just one quarter after its lowest point and continued to increase in each consecutive quarter following this, reaching 174.0 as of Q2 2015. However, the PrEQIn All Private Equity Strategies Index did not return to its pre-crisis level until Q2 2011, six quarters later than the PrEQIn Infrastructure Index, while the S&P 500 TR Index was below the 100 mark until the end of Q1 2012. Despite the growth of both the PrEQIn Private Equity All Strategies Index and the S&P 500 TR Index since 2007, both indices sit below the PrEQIn Infrastructure Index as of Q2 2015 at 158.1 and 165.5 respectively, with the latter overtaking the former in the first quarter of 2013.

With the PrEQIn Infrastructure Index outperforming both the PrEQIn Private Equity All Strategies Index and the S&P 500 TR over the time period following the GFC, it is evident that investing in infrastructure can offer investors the potential for stable returns and diversification from more traditional asset classes.

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