After the Pandemic, Infrastructure Investment Changed, but Did not Plummet

The pandemic disrupted but did not bust infrastructure investment across the world. "It unveiled evident flaws, in particular a sharp underinvestment in some categories of social infrastructure," said Stefano Gatti, the Antin IP Professor of Infrastructure Finance at Bocconi. He presented yesterday the results of the third year of research activity of the Associate Professorship, adding "but assets under management reached in 2020 an all-time record of $655 billion worldwide, and fundraising in Europe, at $35 billion, was only slightly less than in 2019."

A second consequence of the pandemic was the reconsideration of the urgency of different kinds of infrastructure investments, with social and healthcare infrastructure turning out to be much more strategic than previously thought.

"The infrastructure gap cannot simply be covered with fiscal spending, regardless how much extraordinary expenditure all the governments of the world make in the next few years," Prof. Gatti said.

Professors Carlo Favero and Carlo Chiarella introduced a statistical framework aimed at better understanding the long-term dynamics of infrastructure equilibrium prices. "Our framework," said Prof. Chiarella, "can be used to identify equilibrium values for infrastructure prices in terms of factor prices and for factor prices in terms of macroeconomic trends."

The unveiled model allows researchers to obtain long-term forecasts of factor prices consistent with the structural macroeconomic scenario that can be used to form more accurate expectations about the long-term dynamic of equilibrium prices. Tactical asset allocation can be implemented using the predictive power for infrastructure returns of the deviations of infrastructure prices from their equilibria and of factor prices from their macroeconomic trends.