Empirical analysis of European Fund performance

Empirical analysis of European Fund performance

February 2025

Download Whitepaper

Infrastructure demonstrates outperformance while remaining resilient amid global economic volatility

At Igneo Infrastructure Partners we have always believed that a proactively managed portfolio of high-quality infrastructure businesses should offer superior risk adjusted returns. However, the empirical data to support this hypothesis was limited and, quite rightly, open to challenge by investors.

In 2024 Igneo partnered with AFI and granted their team full access to historical performance data from our first flagship European Diversified Infrastructure Fund (EDIF I)* so they could assess the relative performance and stability of the portfolio.

We were pleased to note that, according to the AFI findings presented in the whitepaper, the EDIF portfolio strongly outperformed European listed equities and global listed infrastructure equities comparables, thereby confirming our long-held belief.

* This fund is now closed and was not available in all regions. 

The case for infrastructure as an asset class

The investment case for infrastructure has always been based on the essential nature that portfolio companies play in the smooth functioning of a modern society. Access to clean drinking water, sanitation and waste, the supply of electricity and gas, communications and commuting, leisure travel and global trade are each dependent on the availability of infrastructure and investing in the ownership of these assets can provide the following for investors:

Stability

Infrastructure assets are typically robust to macro cycles or shocks, as demonstrated by portfolio performances during the recent pandemic.

Diversification

Unlisted infrastructure has exhibited low correlation with other asset classes, offering increased portfolio diversification potential.

Liability matching

The long duration of infrastructure investments match long-tail liabilities of many pension funds.

Inflation protection

The long duration of infrastructure investments match long-tail liabilities of many pension funds.

Access to unique assets

Infrastructure assets tend to be of national strategic importance. Historically publicly owned, they are increasingly open to private capital.

The empirical analysis

Igneo submitted all EDIF portfolio company cashflows for analysis by AFI, who assessed various aspects of fund and portfolio company performance over the lifetime of the fund (2009 – 2024) and confirmed:

Capital gains generated by EDIF more than double that generated by listed European proxy and almost quadruple that generated by listed global infrastructure proxy over the same period;

  • EDIF displayed demonstrably lower return volatility compared to the listed proxies and other infrastructure funds;
  • EDIF outperformed other specialist funds by an average of more than 180bps; and
  • EDIF generated alpha of 5.2% across the portfolio.
  • iShares STOXX EUROPE 600 UCITS ETF
  • iShares Global Infrastructure ETF

Capital gains compared to listed global infrastructure proxy 

Outperformed other specialist funds by an average of more than

EDIF generated alpha across the portfolio

Conclusion

In conclusion, we were pleased to note that the AFI analysis confirms our thesis that infrastructure is an attractive asset class that can generate superior risk-adjusted returns and that in particular active asset management demonstrably creates value and generates superior alpha. The EDIF portfolio was robust to increasing interest rates and provided a natural inflation hedge and a diversified investment strategy creates a more robust portfolio.

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