Credit Suisse's Asset Management Thought Leadership Program: Can Infrastructure Investing Enhance Portfolio Efficiency?

Jun 08, 2010, 14:29 ET from Credit Suisse AG

NEW YORK, June 8 /PRNewswire-FirstCall/ -- Credit Suisse's Asset Management division today announced the release of a new white paper entitled "Can Infrastructure Investing Enhance Portfolio Efficiency?" Published as part of the Bank's Asset Management Thought Leadership Program, the paper provides an in-depth look at infrastructure as an investment tool and analyzes what roles the asset class might play in institutional portfolios.  

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According to David Russ, Head of Investment Strategies and Solutions in Asset Management at Credit Suisse, the opportunity set for infrastructure as an asset class is important. "We believe that some exposure to infrastructure—within the context of a diversified portfolio—can help address several challenges currently faced by institutional investors, including potential funding gaps and the negative impact of potentially rising inflation on portfolios." Here's why:

  • Infrastructure has low correlations to many commonly held asset classes—including US equities, global bonds, Treasury Inflation-Protected Securities (TIPS), commodities, private equity and hedge funds. As such, the asset class might help improve a portfolio's Sharpe ratio when deployed strategically.
  • The long-term nature of infrastructure investments can help mitigate duration risk for pension portfolios.
  • Default rates in infrastructure investments are relatively low because captive customer bases and generally stable demand for certain types of infrastructure tend to provide comparatively steadier cash flow streams than more economically sensitive businesses and sectors.
  • Infrastructure is a diverse asset class in and of itself, presenting a range of risk/return profiles and characteristics.

The paper also addresses the characteristics of infrastructure as an asset class and examines the many types of investments in the space and how they differ in scope and potential uses in portfolios. In addition, the white paper provides "real-life" examples of the various roles that infrastructure can play in institutional portfolios.

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SOURCE Credit Suisse AG