Greater Divergence of Returns in Infrastructure than Real Estate
Sector and country allocation decisions in infrastructure could have a substantially greater impact on portfolio returns than allocations in real estate, analysis of the expanded dataset of the MSCI Global Quarterly Private Infrastructure Asset Index shows.
Between March 2009 and March 2025, the average cross-sector dispersion in returns for infrastructure was 6.7%. Previous MSCI research has demonstrated the wide variation in infrastructure returns, with a performance differential of 17 percentage points between the strongest industry (public facility) and the weakest (water) through the first quarter of 2025.
For real estate, analysis of the MSCI Global Quarterly Property Index shows only a 3.4% average performance differential across sectors during the March 2009 to March 2025 period, by contrast. Despite industrial properties strongly outperforming other property types from 2017 until the post-COVID-19 pandemic correction began in 2022, during most of this time series, property sectors had performed relatively similarly, reducing the standard deviation of sector returns.
Country matters
The average dispersion in country performance within infrastructure was also high (at 6.3%) and was again ahead of real estate (at 4.9%), but to a lesser extent. Country performance dispersion in infrastructure may be driven in part by sectoral exposure. In real estate, most countries tend to have at least some exposure to each of the major property sectors. Exposure to infrastructure sectors varies more substantially by country, and some sectors can be heavily influenced by regulatory regimes and differing market structures.
The findings suggest a substantial opportunity for sector-based allocation strategies in infrastructure investing and highlight the importance of using granular data to examine performance and better inform investors making allocation decisions in real assets.
Average cross-sectional standard deviation of 12-month rolling returns by sector and country from March 2009 to March 2025. Infrastructure is represented by the expanded dataset of the MSCI Global Quarterly Private Infrastructure Asset Index, which includes holdings data from closed-end funds. Real estate is represented by the MSCI Global Quarterly Property Index.
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