CFA Level I · CFA Level I Exam · Real Estate and Infrastructure
An investor wants infrastructure exposure with daily liquidity and no need to select individual assets. Compared with direct investment in infrastructure projects, listed infrastructure securities most likely offer:
Listed infrastructure securities most likely offer higher liquidity but returns more correlated with broader equity markets. Exchange trading allows easy buying and selling, yet prices reflect general market sentiment. Direct project investment is illiquid, with appraisal-based values that appear less correlated, and gives more control.
- Ahigher liquidity but returns that are more correlated with broader equity marketsCorrect
- Blower liquidity but returns that are less correlated with equity markets
- Chigher control over asset operations and lower transaction costs
Explanation
Listed infrastructure trades on exchanges, giving greater liquidity, but prices move with equity market sentiment, so correlation with equities is higher than for private direct holdings. Direct investment gives more control but lower liquidity.
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