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. New prudential rules, the Covid-19 pandemic and the increasing visibility of infrastructure in individual retirement products have made the frequent reporting of fair infrastructure valuations all the more urgent.

Measuring the fair market value and therefore the risks of unlisted infrastructure is made more difficult by the paucity of data. Appraisal values are typically stale and do not reflect the market conditions including the latest price of risk applicable to private infrastructure. In the absence of comparable transactions, most unlisted infrastructure investments have effectively been booked at or near their historical cost.

Thanks to recent advances in data collection and asset pricing techniques, it is now possible to estimate the evolution of fair market prices for unlisted infrastructure equity investments. In this note, we report that:

• Common risk factors explain observable market valuations of unlisted infrastructure companies.
• The risk premia of these factors can be measured on an ongoing basis, as new transactions table place. Thanks to these risk premia, individual assets that do not trade but are exposed to the same factors can also be priced.
• This approach predicts transactions prices accurately within 5% of observed transaction prices and produces robust series of returns with no smoothing.

This technology allows measuring the true yield of infrastructure investments, their optimal contribution to multi-asset portfolios, duration and much more.