Description
Infrastructure debt funds are an investment pool, such as a mutual fund or exchange-traded fund, in which the core holdings comprise fixed-income investments. A debt fund may invest in short-term or long-term bonds, securitized products, money market instruments or floating rate debt. Many countries offer debt investments to support government fiscal policies. Risks and returns of government debt funds vary depending on a nation's political and economic environment.
Instrument category
Debt financing
Implementation status
Moderate - tried and tested
Enabling conditions and success factors
- Investment-grade debt is issued by companies with stable outlooks and high credit quality.
- Risks and returns of government debt funds vary, depending on a nation's political and economic environment.
Instrument benefits
- Fees on debt funds are lower than those associated with equity funds because their management costs are inherently lower.
- May invest in a wide swath of securities with varying associated risk levels.
- Large infrastructure assets generally perform well in a downturn, differentiating from other assets such as corporate debt and facilitating diversification.
Challenges and risks to implementation
- Relatively new instrument requiring the capacity to be built.
