Infrastructure: Deciding Matters

Abstract

This study builds upon the understanding of infrastructure developed in our paper “Infrastructure: Defining Matters” with the aim of translating it in practical terms using a more detailed formulation of the schematic for pension fund investment decision-making which we outlined in that paper. Th e method for our doing so is to use as a reference an in-depth review of the decision-making process of one of the leading, if not the leading U.S. public sector pension fund on many matters, including infrastructure investment. The text proceeds as follows: First, we determine how the fund articulates what it understands infrastructure to be or entail. Second, we review what it states are its strategic objectives for infrastructure investment. Third, we canvas its stated perceptions or beliefs as to the financial characteristics of infrastructure investments. Fourth, we review in extensive detail the approaches and parameters according to which the fund seeks to achieve those strategic objectives. Fifth, we compare these with the ones embodied in a modified and refined version of the linked categories formulated in the paper. We suggest that while those approaches and parameters are useful they embody multiple and overlapping characterizations not conducive to systematic analysis. We point out that in terms of substantive content they are encompassed by but do not exhaust ones associated with the linked categories, such as Supply – Exogenous Constraints on Competition, Enterprise – Finance, Non-Enterprise Stakeholders. We discuss why we think the categories could be a more useful tool by which to describe and assess the fund’s infrastructure investments. Sixth we explore more closely certain aspects of the actual investment decisions which the fund has made. We start by detailing as best we can determine not only the vehicles through which the fund has invested but also all the particular investments made by any of the vehicles at the level of the infrastructure-related enterprise. We then consider two of the fund’s investments at the enterprise level, in one case according to the certain of the parameters which the fund has set forth but then in both cases based on the revised version of the linked categories. Finally, we summarize key observations made in the course of the foregoing analysis and off er conclusions which might be drawn from it. These which point to ways the approach we suggest might contribute to better decision-making with respect to infrastructure investments.