The Deutsche analysts argue that returns on such projects are usually meager after taking into account mark-to-market and regulatory risks, the net effect of which crimps the allure of the asset class as a whole.
Specifically, they say the oft-touted low-volatility characteristics of unlisted infrastructure investments are overstated. "Studies of infrastructure returns are based on cash flows and appraised values since there are no markets for most infrastructure," the analysts write.
Pension funds are forming consortiums to cut fees, while Monk is working on a new venture to help long-term investors gain access to well-curated projects.
But it's an uphill battle "We think the current market structure makes it difficult for private investors to increase portfolio allocations into public infrastructure even to the modest level of one to five per cent of assets under management," the Deutsche Bank strategists conclude.