Chapter 5

Question 1

Survivorship bias

Answer 1

Realistically
Emphasis
Returns
“Backfill”

Question 2

Selection bias

Answer 2

Funds with good histories are more likely to apply for inclusion. Backfilling will then cause a significant upward bias.

Question 3

Marking to market bias

Answer 3

Underlying
Illiquid
Last reported
Estimate
Valuation

Question 4

Two classes of infrastructure

Answer 4

Economic
Social

Question 5

Economic infrastructure includes

Answer 5

Highways
Water and sewerage facilities
Various forms of energy generation
Telecommunication networks

Question 6

Social infrastructure includes

Answer 6

Schools
Universities
Hospitals
Public housing
Prisons

Question 7

Characteristics of infrastructure

Answer 7

The assets themselves tend to be single-purpose in nature

The investors’ participation in the asset is often for a finite period

Infrastructure assets are characterized by their long lives. In fact, the capital invested in those projects is often referred to as “patient” capital.

One of the key characteristics of infrastructure assets, and what can make them attractive investments, is that they tend to be or exhibit the characteristics of a natural monopoly