CLUSTER PROJECT 1: INFRASTRUCTURE INVESTMENT AND SUPERANNUATION
The underlying design feature of this Cluster Project considers infrastructure as one of numerous asset classes in which superannuation funds can invest to explore the asset class and portfolio characteristics of this key investment exposure. The Cluster Project also explores lessons from PPPs to provide insights into structuring future infrastructure investments.
Principal Researcher: Associate Professor Robert J Bianchi (Griffith University)
Research Team: Dr Adam N Walk (Griffith University) and Professor Michael Drew (Griffith University)
This research examines the ability of systematic risk factors to explain the returns of bonds issued by Public−Private Partnerships (PPPs) in Australia. Despite the large number of PPP transactions being conducted in Australia in recent years, no previous studies have examined the systematic risk factors that explain the variation of returns for PPPs in Australia or around the world. Using the systematic risk factors of term, default and liquidity in an asset pricing model, this study finds that systematic risks can explain between 37 per cent of the variation of bond returns of a toll road PPP to 84 per cent of the variation of bond returns of a hospital PPP.
This paper is an earlier version of Working Paper 2014-05.
- The Predictability of Australian Listed Infrastructure and Public-Private Partnership Returns Using Asset Pricing Models, WP 2014–05
Can asset pricing models predict the future returns of publicly listed infrastructure investments in Australia? This study finds that asset pricing models exhibit poor out-of- sample predictive performance when compared to simple, fixed excess return models for the 1997−2012 period. Consistent with recent US evidence, these results suggest that using the long-term historical mean return may be a reasonable starting point for superannuation funds seeking to understand the long-term expected returns of publicly listed infrastructure. This paper is an updated version of Working Paper 2013-05.
This study employs an asset pricing approach to examine whether infrastructure investments are an asset class in their own right. By employing the Merton zero-criterion approach, we demonstrate that global and national listed infrastructure returns cannot be deemed as a separate asset class. Empirical evidence suggests that listed infrastructure returns are simply a sub-set of listed stocks with significant industry exposure to the utility sector. These findings have important implications for the asset allocation decisions of pension and superannuation funds.
This study examines some of the challenges facing Public Private Partnerships (PPPs) in Australia, specifically the characteristics of projects when the private and public sectors experience unexpected financial losses. We estimate that 35 out of 155 PPPs (ie. approximately 22.6%) report additional financial costs after the financial close date of the transaction. The lack of disclosure and transparency in the financial reporting of PPPs remains a formidable barrier in determining whether there is commensurate excess returns to the private sector from successful PPP projects to offset the associated losses with the problematic PPPs, and remains a significant obstacle to attract new equity investment in Australian PPPs in the future.