Private Asset Pricing Research
Valuing private assets is made more difficult due to the limitation of market data. This matters because accurate valuation informs investment decisions and acquisitions but also pension, insurance and wealth product valuations. Inaccurate valuation may lead to misallocation of resources, overpayment, or undervaluation, impacting profitability and risk management. Additionally, it affects stakeholders’ confidence and regulatory compliance. Robust valuation practices must ensure transparency, fair pricing, and efficient capital allocation in private markets, fostering investor trust and sustainable economic growth.
Our research on asset valuation focuses on applying the tenets of modern asset pricing and the standards of international accounting frameworks to the estimation of private market asset prices. We design and test models that capture the pricing dynamics of private markets and allow shadow pricing large sections of the investible universe to create robust and granular comparable sets that can also be customised.
privateMetrics® Asset Valuation Methodology
September 2024
The privateMetrics asset pricing model enables the fair market value of unlisted private equity investments to be estimated in a robust and dynamic manner. It solves the twin problems in private markets of smoothed reported NAVs, that are not convincingly marked-to-market or capture risk, and of the absence of a ...
infraMetrics® Asset Valuation Methodology
September 2024
The infraMetrics asset pricing model allows estimating the fair market value of unlisted infrastructure equity investments in a robust and dynamic manner. It improves greatly on traditional approaches which tend to generate backward-looking or ‘stale’ net asset values that are not aligned with the level of market prices at the ...
In this supplement, we analyse ESG risks and their consequences for investors, assess the investment impact of climate risk on global infrastructure, and share our latest research findings on infrastructure investment portfolio construction and risk management. ...
We examine ESG risks and their implications for the investment community, the investment impact of climate risk on global infrastructure, and present our latest research insights into infrastructure investment portfolio construction and risk management. ...
This paper proposes a factor model based solution that, when calibrated with transaction data and novel risk factors, can transform sparse, noisy, and biased transaction data into meaningful information that aids asset allocation, benchmarking, and monitoring of private investments. ...
In this paper, we ask what investors in Thames Water – and its holding company Kemble Water – would have learned about the level of risk of their investment and its likely market value had they compared its characteristics to market and peer group data. ...
This paper describes the novel method that we have developed to measure climate risks. While we here apply this method to infrastructure assets, it paves the way to using similar approaches to enlarge the scope of its application. ...
In this paper, we examine the impact on realised performance of the permanent shift in investor preferences for low carbon energy investments, and how it relates to the expected returns of green power investments. ...
We look at the potential loss of value of Russian airports due to the war in Ukraine. Drivers of impact include the closure of a number of national airspaces to Russian airlines as well as related sanctions that have been imposed since the start of the invasion. ...
We consider whether or not natural gas should be included in the EU Green Taxonomy because of the latter’s distorting effect on the cost of capital of energy projects. We argue that excluding gas from the taxonomy would not increase the cost of capital of gas generation. ...
In this paper, we examine the drivers of the volatility of unlisted infrastructure equity investments. Our analysis uses the EDHECinfra database of unlisted infrastructure equity investment data, which covers hundreds of firms over 20 years and a new approach to measure the market value of these investments over time. ...
As more investors consider allocations to unlisted infrastructure, the need to bring the asset class into the mainstream of risk management, asset allocation and prudential regulation is increasing rapidly. Recent advances in data collection and asset pricing techniques now enable the evolution of fair market prices to be estimated. ...
We examine how infrastructure companies differ from the rest of the economy and in particular whether or not they tend to pay larger and more frequent dividends. We find that infrastructure companies exhibit key systematic differences with a sample of ‘matched’ firms that are otherwise comparable. ...
The high level of tolls on privatised highways is a sensitive matter in French politics. This research paper on the adequate level of tolls on French roads is prominently featured in a report released by the Senate Investigative Committee on the control and regulation of highway concession contracts and highlights ...
Cette publication, dont les conclusions sont reprises dans leur intégralité par le rapport de Commission d’enquête du Sénat sur « le contrôle, la régulation et l’évolution des concessions autoroutières » publié le 18 Septembre 2020, met en lumière l’archaïsme de la réglementation des péages dans les concessions d’autoroutes en France. ...
This paper examines the drivers and evolution of credit spreads in private infrastructure debt. We ask two main questions: Which factors explain private infrastructure credit spreads (and discount rates) and how do they evolve over time? Are infrastructure project finance spreads and infrastructure corporate spreads driven by common factors? ...
This paper represents the first attempt at studying the relationship between the ESG and financial characteristics of infrastructure companies. Indeed, data on ESG reporting is available and there is ground in the academic literature for arguing that the tendency to report ESG practices is related to actual sustainable outcomes. ...
This paper drawn from the EDHECinfra /LTIIA Research Chair shows that common risk factors found in numerous asset classes explain the evolution of unlisted infrastructure secondary market prices. It also shows that after a long period of prices increases, “peak infra” may already be behind us. ...
The objectives of this paper are to document the statistical characteristics of debt service cover ratios (DSCRs) in infrastructure project finance, and to develop and calibrate a model of DSCR dynamics. Advanced stochastic modelling of infrastructure project debt has the potential to considerably improve credit risk measures. ...
Using new data, we show that construction risk in infrastructure project finance is well-managed and that project sponsors face very little construction risk compared to the well-documented, systematic and very large costs overruns found in traditional infrastructure project procurement. ...
This paper is part of an ongoing research project aiming to create long-term investment benchmarks for investors in infrastructure. It is the first valuation and risk measurement model created specifically for unlisted infrastructure debt instruments. ...
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