Long-Term U.S. Infrastructure Returns and Portfolio Selection

Our understanding of the long-term return behavior and portfolio characteristics of public infrastructure investments is limited by a relatively short history of empirical data. We re-construct U.S. listed infrastructure index returns by mapping their monthly performance to received systematic and industry risk factors from 1927 through 2010. Our findings reveal that the infrastructure returns in recent years may understate the tail-risk that investors could experience over the long-term, however, this tail-risk is commensurate with holding a broad portfolio of U.S. stocks. For mean-variance and mean-CVaR investors, we report the benefits of holding public infrastructure assets in investment portfolios.