CFA Level I · CFA Level I Exam · Real Estate and Infrastructure
A pension fund wants exposure to infrastructure assets that already operate and generate stable cash flows, with limited construction risk. Which type of infrastructure investment is most likely appropriate?
Brownfield investments are the most appropriate choice. They are existing infrastructure assets that already operate and produce relatively stable cash flows, so construction risk is limited. Greenfield projects involve new construction and uncertain demand, which makes them riskier and unsuited to an investor seeking stability.
- AGreenfield projects
- BBrownfield investmentsCorrect
- CLand held for development
Explanation
Brownfield investments are existing, operating infrastructure assets with established cash flows and little construction risk. Greenfield projects are newly built and carry construction and demand risk, and undeveloped land is not an operating asset producing stable cash flow.
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