In this paper, we compare the behaviour of unlisted infrastructure equity investments with that of traditional assets, with a focus on the effects of shocks such as recessions, financial market crises and policy shocks. We compare the return correlations and drawdown characteristics of geographically comparable indices of unlisted infrastructure equity, listed equity, treasuries and corporate bonds. We then examine their return drawdown and co-variance, as well as higher co-moments of returns (co-skewness and co- kurtosis), to determine the presence or absence of joint extreme risks.

These findings have risk management and prudential implications. They show that, in times of market stress, while infrastructure does experience drawdowns and is exposed to a market risk premia and to a significant rate risk, it can nonetheless protect the portfolio on the downside – just as long as investor are exposed to a well-diversified basket of infrastructure assets in which most asset-specific risk has been diversified. This informs the evolution of the treatment of infrastructure assets under the EU Solvency framework or other prudential regulations.