Valuations for private infrastructure investment have long been murky and at times challenging to compare to other asset types.
Using a large dataset of more than 1,000 transactions, Macquarie research has derived a time series of private infrastructure valuations to gain new insights, detailed in its most-recent Pathways paper, now available for download by professional investors.
Global infrastructure strategist, Aizhan Meldebek, summarizes the work including a finding that infrastructure valuation multiples have a negative relationship with interest rates and a positive relationship with inflation.
“We have created an infrastructure ‘cap rate’ that enables investors to directly compare infrastructure valuations with those of real estate,” says Meldebek.
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Investment strategies that hold securities issued by companies principally engaged in the infrastructure industry have greater exposure to the potential adverse economic, regulatory, political, and other changes affecting such entities.
Infrastructure companies are subject risks including increased costs associated with capital construction programs and environmental regulations, surplus capacity, increased competition, availability of fuel at reasonable prices, energy conservation policies, difficulty in raising capital, and increased susceptibility to terrorist acts or political actions.
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