This Emerging Investment Category Could Be A Game Changer For Bond Investors

If you’re one of a number of investors concerned about the possibility of a corporate bond bubble, new research has revealed one possible hedge for sophisticated investors. According to a new report by CEPRES, private infrastructure assets are a solid hedge for corporate bonds and can even deliver stronger returns.

CEPRES used regression analysis to calculate risk adjusted return (alpha) and correlation (beta) for private infrastructure assets compared to the U.S. corporate bond market. The firm found an alpha of 19.5 percent and a beta of -0.9. That means corporate bonds and private infrastructure assets have a nearly perfect inverse correlation.

“Infrastructure, as a yielding asset, can be useful alternative for liability driven fixed income investors, like pensions and insurers seeking higher returns,” CEPRES CEO Daniel Schmidt explained. “For those especially worried about volatility and downward pressure on public markets, PE Analyzer shows that private infrastructure can help hedge risk and enhance a balanced portfolio.”

Retail investors may not have access to private infrastructure assets on the public market, but they certainly have access to corporate bonds.

Investment grade corporate bond ETFs like the iShares IBoxx $ Invest Grade Corp Bd Fd LQD and high-yield corporate bond ETFs like the iShares iBoxx $ High Yid Corp Bond (ETF) HYG have been popular investments among traders looking to diversify outside of stocks.