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:
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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