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Although traditionally the preserve of gov … Although traditionally the preserve of governments and municipal authorities, infrastructure has recently become an asset class in its own right for private-sector investors, most notably pension funds. Historically, pension funds have tended to invest mostly in "core assets" (such as money market instruments, government bonds, and large-cap equity) and, to a lesser extent, "alternative assets" (such as real estate, private equity and hedge funds). The average allocation to infrastructure historically represented only 1% of total assets under management by pensions, excluding indirect investment through ownership of stocks of listed utility and infrastructure companies. However, government disengagement from the costly long-term financial commitments required by large infrastructure projects in the wake of the 2008–2012 global recession, combined with the realization that infrastructure could be an ideal asset class providing advantages such as long duration, facilitating cash flow matching with long-term liabilities, protection against inflation, and statistical diversification (i.e., a low correlation with "traditional" listed assets such as equities and fixed income), has prompted an increasing number of pension executives to consider investing in the infrastructure asset class. This macro-financial perspective on pension investment in infrastructure was developed by US, Canadian, and European financial economics and labor law experts, notably from Harvard Law School, the World Pensions Council, and the OECD. "At the start of the decade, the World Pensions Council (WPC) and the Organisation for Economic Co-operation and Development (OECD) helped convene some of the first international summits focusing on the future of long-term investments in the post-Lehman era, arguing that infrastructure would soon become an asset class in its own right.At that time, we thought that the crisis would usher an era of durably low interest rates, pushing more pension and insurance investors to pursue a ‘quest for yields,’ increasing mechanically their allocation to non-traditional asset classes such as private equity, real estate and [listed and non-listed] infrastructure."d [listed and non-listed] infrastructure."
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