Infrastructure and the Global Financial Crisis: Ten Years On
A decade on from the 2007-08 financial crisis, this paper examines how infrastructure fared during the crisis and its aftermath, and how a subsequent financial downturn might affect infrastructure investments.
The resilience of infrastructure
A decade after the demise of Lehman Brothers and Washington Mutual heralded the 2007-08 financial crisis, this paper examines how infrastructure, as an asset class, fared during the crisis and its aftermath, and how a subsequent financial downturn
could affect infrastructure investments.
After several years of relatively strong economic growth, concerns are once again rising that the global economy may be headed for a downturn. Financial market volatility, the length of the upswing in the economic cycle in many advanced economies,
and the removal of unprecedented expansionary monetary policy are just a few of the catalysts being considered by market analysts for a potential economic downturn.
The effects of the GFC are still shaping economic performance and policy, and have left a lasting impact on markets and investors.
The Global Financial Crisis (GFC) led to a range of adverse economic and financial issues that impacted all asset classes. Although unlisted infrastructure can exhibit an inherent robustness for many reasons (which was well demonstrated during
the financial crisis), this asset class was not immune from being buffeted by the external investment environment. Although there is some uncertainty as to what the next economic downturn will look like, this paper considers a number of prototype
downturn scenarios that recognise and indicatively quantify how unlisted infrastructure performance may be affected if GDP growth falters.
Comparison of Total Returns: Unlisted Infrastructure Vs Other Asset Class Benchmarks
Source: IFM Investors, Preqin (Note: Preqin Unlisted Infrastructure Index commenced December 2007), Bloomberg.
To 31 December 2018 except Preqin (30 June 2018). Past performance does not guarantee future results.