Infrastructure assets are not homogeneous – there are substantial differences within the infrastructure sectors on the relative risk/return proposition, degree of cash flow inflation linkage, sensitivity to underlying economic cycles, and correlation with traditional asset classes.
With our significant experience with infrastructure, Whitehelm constructs bespoke infrastructure portfolios for clients. We employ a proprietary approach in assessing potential acquisitions and divestments (via the development of appropriate long-term risk-adjusted hurdle rates), and manage asset specific and market-wide risk exposures through a Risk Index overlay and factor-risk analysis.
Our asset specific risk assessment includes development of detailed scenario analyses and consideration of maximum loss scenarios for potential investments and existing assets. Infrastructure sector expertise is key to modelling appropriate scenarios and shocks, providing meaningful analysis for the investment process.
While asset specific exposures can be significant, market-wide risks can also aggregate across asset sectors, geography and vintage, and become more correlated at times during heightened financial stress. Accordingly, our factor-risk assessment provides an additional overlay above the traditional elements typically used for portfolio construction and risk minimisation.