Infrastructure Assets and Inflation

Gerald Stack, Dennis Eagar and Kris Webster

The aim of this chapter is to define the infrastructure asset class, and to explain how each different segment within the infrastructure class is linked to inflation. In fact, for infrastructure to be considered a separate asset class, it must generate returns that are different from other asset classes. Indeed, infrastructure provides a unique and distinct investment opportunity, as companies often operate in a quasi-monopolistic environment where demand is fairly price inelastic. Because of this, and because their earnings are structurally linked to inflation, infrastructure companies can generate remarkably stable real (ie, inflation-adjusted) returns over the business cycle.


The term infrastructure can be used to express a multitude of meanings. For the purposes of this chapter, an asset is taken to be an infrastructure asset if

    • it provides a service that is essential for the efficient functioning of a community, and hence faces reliable demand irrespective of underlying economic conditions,

    • the cashflows it generates are not affected by external variables, such as competition, technology obsolescence or commodity price risk,11 Alth

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