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Private equity: growing investment vehicle in infrastructure

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  • Chicker, Gauri
  • Garvin, Michael J.

Abstract

A demand for infrastructure development concurrent with federal deficits and budget shortfalls faced by the government has encouraged private participation in infrastructure projects. This has caused infrastructure funds to evolve. Infrastructure funds allow investors to gain access to the underlying characteristics of the portfolio of infrastructure assets. These funds have seen a growth in investment through unlisted and listed equity and are attracting investors because of their stable, long-term nature and relatively strong yields. Pension funds have also invested in the infrastructure sector for portfolio diversification and risk mitigation. The investors can not only reduce risk by investing in a portfolio of infrastructure entities with a negative or relatively low correlation between them, but also by investing in the equity market of other sectors. A low correlation between infrastructure and other sectors has enticed the risk-averse managers to invest in infrastructure funds. This paper discusses various cash inflow channels that support infrastructure growth and the reasons for the exponential growth in infrastructure funds. Various barriers and regulations that discourage investment in infrastructure assets are also highlighted.

Suggested Citation

  • Chicker, Gauri & Garvin, Michael J., 2009. "Private equity: growing investment vehicle in infrastructure," 50th Annual Transportation Research Forum, Portland, Oregon, March 16-18, 2009 207723, Transportation Research Forum.
    • Handle: RePEc:ags:ndtr09:207723
    DOI: 10.22004/ag.econ.207723
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    References listed on IDEAS

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    1. Richard A. Brealey & Ian A. Cooper & Michel A. Habib, 1996. "Using Project Finance To Fund Infrastructure Investments," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(3), pages 25-39, September.
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    Cited by:

    1. Surbhi Gupta & Anil Kumar Sharma, 2022. "Evolution of infrastructure as an asset class: a systematic literature review and thematic analysis," Journal of Asset Management, Palgrave Macmillan, vol. 23(3), pages 173-200, May.

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