With this new Chair, EDHEC-Risk Institute will conduct research supported by Meridiam Infrastructure and Campbell Lutyens on “Infrastructure Equity Investment Management and Benchmarking.” The Chair will involve a research team made up of three senior researchers (professors and engineers) from EDHEC-Risk's campus in Singapore for the next three years.
This research aims to provide a better understanding of the nature and investment profile of equity investment in infrastructure assets. It will focus on fostering data collection and aggregation from investors and on improving the benchmarking of return distributions for direct and indirect investment in infrastructure equity by developing an academically-validated and industry-recognised index.
EDHEC-Risk Institute, Meridiam Infrastructure and Campbell Lutyens are committed to bringing further knowledge to institutional investors, financial regulators and governments while the infrastructure world and financial regulations have dramatically evolved in the past decade.
As part of the Chair launch, EDHEC-Risk Institute, Meridiam Infrastructure and Campbell Lutyens are delighted to announce the publication of a first foundation paper: “Towards Efficient Benchmarks of Infrastructure Equity Investments.” It highlights a recent research quandary with respect to infrastructure equity investment which has also been a source of interrogation for final investors: while the economics of underlying infrastructure investment suggest a low and potentially attractive risk profile, the experience of investors and available research evidence have been different and rather mixed. This paper explains why this has been the case and what new research and benchmarking efforts are necessary to create investment solutions that align expectations and observed investment performance of infrastructure equity. These are the challenges that the Meridiam/Campbell Lutyens Research Chair will address in 2013-14.
The results of the Chair will allow investors to assess the different opportunities within the asset class and contribute to the implementation of policy reforms that will help to shape the infrastructure investment industry. In particular, it will contribute to the ongoing work undertaken by the European financial regulators to assess the consequences of the coming Solvency II framework for long-term investment by insurers, EIOPA, the European regulator’s initiatives in relation to such investment by pension plans, and the upcoming European Commission Green Paper on long-term investment. Initial results focusing on the Solvency II treatment of project finance equity will be presented on March 27, 2013, at the EDHEC-Risk Days Europe conference in London.
According to Thierry Déau, CEO of Meridiam Infrastructure, “We are delighted to support academic research at EDHEC-Risk Institute. Indeed, channelling additional long-term savings to infrastructure investment, a key objective for policymakers, will be achieved only if institutional investors and financial regulators are provided with sound academic analysis.”
John Campbell, Chairman of Campbell Lutyens, said, “This research chair with EDHEC-Risk Institute will provide robust results that will be deeply relevant for all actors in the infrastructure investment chain and will support enhanced practices. In the area of infrastructure investment, the world has moved on in the last few years, but research into the performance of infrastructure as an asset class has not moved on with it. This new research will help to provide the underlying information to enable asset allocators to act along the whole infrastructure spectrum. We are sure that the research chair is a major step forward in this regard.”
Professor Noël Amenc, Director of EDHEC-Risk Institute, added: “This research chair should benefit the entire investment management community and help improve asset allocation and portfolio construction decisions. Final investors like pension funds have to meet a combination of performance-seeking and liability-hedging objectives, so the performance associated with assets like infrastructure is playing a growing role in pension funds’ alternative investment decisions. However, the nature and performance of infrastructure assets remains ill-defined and little understood, largely because of limited academic research and a paucity of available data. Campbell Lutyens and Meridiam Infrastructure have worked closely together since Meridiam Infrastructure’s formation in 2005. They share a determination to expand institutional investment in this differentiated and important asset class and we greatly appreciate the support they are providing for this research.”
The paper “Towards Efficient Benchmarks of Infrastructure Equity Investments” can be downloaded here.