Bridging Public Pension Funds and Infrastructure Investing
97 Pages Posted: 2 Feb 2019 Last revised: 18 Jul 2019
Date Written: January 20, 2019
Underfunding of U.S. public pensions is a chronic policy issue that has become more severe over time. Public pension obligations were estimated at $5.96 trillion at the end of 2017 supported by assets of $4.33 trillion — a shortfall of $1.63 trillion and a ‘funded-ratio’ of 72.6%. We consider the sustainability of public pension systems in the face of changing demographics and frequently inadequate funding and investment returns, and make the connection to the long-term capital needs for infrastructure renewal and development, including the shift of such projects from government to the private sector or to public-private partnerships. We examine how infrastructure finance has performed as an asset class. We assess alternative ways of achieving a more efficient connection between public pension funds and the capital structures of infrastructure projects.
Keywords: Public pensions, pension liabilities, infrastructure, asset allocation, real assets, pension governance, illiquidity premium, investment expenses
JEL Classification: J32, G11, G23, H41, H75, O18, R42, R53
Suggested Citation: Suggested Citation