Infrastructure Investing:

INSIGHTS
Key Benefits and Risks

J.P. Morgan Asset Management Global Infrastructure can be defined as the essential facilities and services upon which the economic produc-
Real Assets Research tivity of society depends. These assets are typically involved in the movement of goods, people, water,
and energy, and include1:
For information please contact: • Regulated assets, including electricity transmission lines, gas and oil pipelines, water distribution sys-
[Link]. tems, and wastewater collection and processing systems
group@[Link]
• Transportation assets, including toll roads, bridges, tunnels, railroads, rapid transit links, seaports,
and airports
Larry Kohn
• Communications assets, including radio and television broadcast towers, wireless communications
Managing Director towers, cable systems, and satellite networks
Infrastructure Investments
• Social infrastructure assets, including schools, hospitals, prisons, and courthouses
Tel: (212) 648-2227
[Link]@[Link] Less risk More risk
Less return More return
Robert Pease
Vice President Core and Core Plus Value-Added Opportunistic
Infrastructure Investments Bridges, tunnels, toll roads Airports, seaports Development projects
Tel: 212-648-1931 Pipelines, energy Rail links Satellite networks
[Link]@[Link] transmission and distribution
Contracted power generation Merchant power generation
Water and
Daniel Schuller Rapid rail transit Non-OECD country
wastewater systems
infrastructure
Vice President
Infrastructure Investments
Tel: (212) 648-2860 Historically, existing, core infrastructure assets in developed geographies (the lower end of the risk
spectrum) have offered equity investors low double digit returns with the majority of that return
[Link]@[Link]
coming from cash yield and the rest from capital appreciation.
Exhibit 1: Illustrative infrastructure returns
Lori Pollan
The following illustrative returns and yields are based on historical data prior to July 2008. Given the changing
Vice President market environment, we expect that a new equilibrium will be reached and expected returns will be higher.
Marketing/Client Relations
Avg. cash yield % Avg. leveraged Capital appreciation
Tel: (212) 648-2192 Asset segment Risk (years 1–5)a IRRb (%) potential
[Link]@[Link] Private Finance Initiatives (PFI) Low — Medium 4-5 6-9c Extremely Limited
Toll roads (Operating) Low — Medium 4-6 8-12 Limited
Contracted power generation Low — Medium 4-7 10-13 Limited
Natasha Austin Regulated assets Low — Medium 5-8 10-15 Limited
Rail Medium 8-12 14-18 Yes
Associate Airports/Seaports Medium 4-7 14-18 Yes
Toll roads (Development) Medium — High 3-5 12-20 Yes
Marketing/Client Relations
Communications networks Medium — High 4-7 15-20 Yes
Tel: (212) 648-1725 Merchant power generation High 4-12 15-25 Yes
[Link]@[Link] Source: J.P. Morgan Asset Management
a Cash distribution to equity holders as a percentage of equity investment.
b Assumes debt of 50% to 85% and investment periods of not less than five (5) to seven (7) years.
c PFIs generally finance social infrastructure. New development of PFIs may return as much as 10–12%, to compensate for
greater risk.
1 “Infrastructure: A Growing, Real Return Asset Class,” Mark A. Weisdorf, CFA Institute 2007
 There is a current and growing global need for governmental • Attractive long-term returns: The services provided by infra-
bodies to finance, maintain, modernize, expand and develop structure assets are essential for the functioning of a society.
infrastructure facilities essential to ensuring continued While not allowing infrastructure assets to charge monopoly
growth in economic activity and productivity. It is estimated prices, governments must allow private owners to earn fair
that $16 trillion will be required to modernize and expand returns in order to incentivize them to keep facilities in good
water, electricity and transportation systems in the U.S., working order, and invest for future growth and modernization.
Canada and Western Europe over the next 25 years.2 With • Inflation protection: Rates charged by infrastructure assets
governments increasingly hard-pressed to obtain the capital are determined by regulators, concession agreements with gov-
required to maintain and expand their infrastructure, they ernments, and long-term contracts. Owners generally have the
have begun to recognize that private sector capital can be ability to increase rates at some level linked to inflation and/or
used to satisfy those infrastructure needs, allowing them to the economy over time.
focus existing limited resources toward other vital functions
Concurrently, while they can be mitigated, there are several
within their communities. These trends present a significant
key risks of infrastructure investing:
opportunity for investors to acquire and manage high-quality
assets around the world. • Sub-sector: Each infrastructure sub-sector has different risk
factors, return drivers, and economic sensitivities. Due to
Investors are increasingly considering infrastructure as an
low correlation among sub-sectors, these risks can be
attractive investment alternative primarily because these
reduced by constructing a well diversified infrastructure
assets can provide portfolio diversification with the potential
portfolio.
for stable cash yields.3 In the current market environment,
the demand for core plus private infrastructure has been par- • Political and regulatory: Different countries/regions have
ticularly strong because these investments seek to offer long- different political, regulatory and legal frameworks. Espe-
term exposure to relatively stable, economically insensitive, cially in jurisdictions with relatively shorter regulatory histo-
inflation protected cash flows. These assets have the poten- ries, regulatory decisions may be inconsistent, increasing
tial to generate low volatility, consistent growth of cash flows uncertainty for investors. Investing in politically stable
and returns that are uncorrelated with other asset classes, regions with established legal and regulatory frameworks
resulting in very attractive diversification benefits for inves- can reduce these risks.
tors. This paper summarizes the key benefits and risks of • Stage of development: Development projects face higher
investing in infrastructure.4 construction risks and demand uncertainty compared to
mature assets. Investors can choose to avoid these risks by
Infrastructure assets have several unique characteristics that
investing only in existing infrastructure. Those willing to take
make them attractive investments. Here are some potential
these added risks may be compensated with higher returns.
benefits:
• Liquidity: Due to the size of some assets, the limited num-
• Stable cash flows and economic insensitivity: Because most ber of potential buyers and regulatory approval require-
infrastructure assets have monopolistic positions in and provide ments, divestments of infrastructure assets can take a sig-
essential services to the markets they serve, demand is often nificant amount of time and effort. An open-ended fund pro-
very stable. For those assets, usage does not materially decline vides a long-term investment approach that will not force
with price increases or during periods of economic weakness. asset sales and may provide added liquidity relative to
• Diversification benefits: As a result of low usage volatility, closed end funds.
economic insensitivity, and inflation-protection characteristics, • Emerging asset class: As a relatively new asset class, infra-
a portfolio of infrastructure assets has low correlation to other structure does not have reliable return data comparable to
major asset classes resulting in compelling diversification other asset classes which makes it difficult to model in an
benefits. asset allocation. Using historical cash flows to model returns
is one method we will discuss that allows investors to make
a more informed allocation decision.

2 Booz Allen Hamilton, Strategy + Business, issue 46, Spring 2007.

3 “Infrastructure Investing: A Portfolio Diversifier with Stable Cash Yields,” J.P. Morgan Asset Management.
4 This paper focuses on core-plus, developed market infrastructure investments with an emphasis on open-ended vehicles. JPMAM Global Real Assets
believes that other investment vehicles are appropriate for more opportunistic strategies, such as development projects and non-OECD infrastructure,
which may be suitable for investors interested in a higher risk/return profile. Please refer to the JPMAM research piece “Greenfield Infrastructure
Assets.”

2
 • Credit market risk: Infrastructure assets providing stable shows the steady increase in electricity usage since 1974
cash flows present opportunities to boost return on equity regardless of the economic environment or price of electricity.
via leverage at the operating company level. Credit market The estimated price elasticity for residential electricity
conditions impact the amount, cost and terms of credit consumption is –0.05 (i.e., a 20% increase in price leads to
available to infrastructure assets. Managers can mitigate this a 1% decline in consumption).
risk by making conservative refinancing assumptions when
Similarly, the demand for natural gas is not highly correlated
underwriting and employing leverage prudently, in quantity,
to the price of the underlying commodity. As demonstrated in
structure and tenor.
Exhibit 3 (following page), the demand for natural gas is driven
• Currency volatility: A global infrastructure investment by temperature; it is not dependent on the economy or on the
strategy provides diversification benefits to moderate price of the underlying commodity. The correlation coefficient
several risks (e.g., political, regulatory, demographic) but between heating degree days (or HDD—which serve as a
does expose an investor to the currency volatility of the proxy for cold weather) and the monthly residential natural
underlying portfolio companies. Investors can hedge this gas consumption in the U.S. is 0.86.
with a currency overlay strategy.
Infrastructure assets can provide
Benefits of infrastructure investing diversification benefits
As a result of low usage volatility, economic insensitivity, and
Provision of essential services with little or
inflation-protection characteristics, a portfolio of infrastruc-
no competition results in inelastic demand ture assets has low correlation to other major asset classes
Infrastructure assets supply essential services and, as a resulting in attractive diversification benefits. Historical
result, demonstrate a usage pattern similar to other non-dis- return data for a broad set of infrastructure assets does not
cretionary consumer goods.5 Since these assets provide exist, particularly in the U.S. where toll roads, bridges, air-
essential services, and rates that are charged for these services ports and seaports are largely owned by the government or
are affordable and are set at levels below monopoly prices, quasi-government agencies and have, until recently, rarely
usage does not significantly decrease during periods of been bought and sold on the open market. As a result, in a
economic weakness or when rates are increased. Exhibit 2 recent analysis, we examined historical cash flows of 256 core

Exhibit 2: Electricity delivered to residential and commercial consumers (rolling 12 months) versus the average annual retail price (in 2008
prices) in the U.S., January 1974–July 2008
GWh (millions) USD per kWh
1.6 Recession $0.18
1.4 $0.16
1.2 $0.14
$0.12
1.0
$0.10
0.8
$0.08
0.6 Commercial consumption $0.06
0.4 Residential consumption $0.04
0.2 Average retail price (RHS) $0.02
0.0 $0.00
1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007
Sources: EIA, J.P. Morgan

5 Appendix A.

3
 Exhibit 3: Natural gas consumption in residential and commercial sectors and national heating degree days (rolling 12 months) versus the
real natural gas price in the U.S., January 1974–July 2008
Trillion cubic feet and thousand heating degree days Wellhead price, USD per thousand cubic feet
6 Residential consumption 12
Recession Heating degree days (000s)
5 10

4 8
Commercial consumption
3 6

2 4

1 2
Wellhead price (RHS)
0 0
1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007
Sources: EIA, National Climatic Data Center, J.P. Morgan Asset Management
The HDD index shows the need for energy to heat dwellings. The number of heating degrees in a day is the difference between 65°F (18°C) and the
average outside temperature for that day. National HDD is the average of regional HDDs, weighted by population

infrastructure assets and determined that infrastructure cash Governments and regulators allow fair
flows are not highly correlated to those of equities and real returns in order to entice private capital to
estate, as shown in Exhibit 4.6,7
invest in infrastructure
Exhibit 4: Correlation coefficients between infrastructure,
corporate and real estate cash flows 1986–2006 Infrastructure assets provide services that are essential for
Real economic activity and a basic standard of living in modern
Infrastructure Corporate Estate society. Without the services supplied by infrastructure
EBITDA EBITDA NOI assets, ranging from water and sewerage systems to electricity
Infrastructure EBITDA 1.0 -0.1 0.31 and airports, a modern economy could not function. For that
Corporate EBITDA 1.0 -0.17 reason, governments are increasingly focused on ensuring
Real Estate NOI 1.0 that infrastructure assets are available, in good condition and
* Correlation coefficients are based on annual data are consistently reliable. The causality between the availability
Source: J.P. Morgan Asset Management. Exhibits 4 and 5 are shown for
illustrative purposes only. The information shown is based on proprietary of infrastructure services and economic productivity is well-
internal analysis. No guarantee is being made that the figures above are established, and governments across the developing world
representative of expected future results.
make provision of infrastructure a high priority. In the
In order to provide investors with a viable way of analyzing developed world, as observed in the California electricity crisis
infrastructure performance so that informed asset allocation of 2000 and 2001, the Paddington train crash of 1999 in the
decisions can be made, historical cash flows were used as the U.K., and more recently in the Minnesota bridge collapse in
primary factor to determine hypothetical historical returns. 2007, any stoppage or malfunction of infrastructure services
Those returns have had very low correlations to the returns rightly results in public concern and outcry. Booz Allen
of other asset classes over the last ten years and may there- Hamilton estimated that $40 trillion is needed over the next
fore significantly improve portfolio diversification and risk- 22 years to replace the aging infrastructure required to
adjusted returns. accommodate growing and underserved populations.8 Many
Exhibit 5: Correlation coefficients of 10-year returns governments are not in a fiscal position to meet this spending
U.S. Direct need. Budget constraints continue to worsen. Tax receipts are
U.S. Large EM Real falling due to the faltering economy and the ability to issue
Treasuries Munis Cap Equities Estate debt is becoming more difficult due to credit market conditions
Infrastructure 0.19 0.21 0.04 0.06 0.23 and debt ceilings. As a result, governments are becoming more
Source: J.P. Morgan Asset Management. The above table is shown for willing to involve private capital in the process and allow
illustrative purposes only.
private capital to earn a fair return that will incentivize the

6 “Infrastructure Investing: A Portfolio Diversifier with Stable Cash Yields,” J.P. Morgan Asset Management.
7 The historical return performance of a well-balanced infrastructure portfolio is difficult to obtain, since private involvement in some infrastructure sub-
sectors, such as toll roads and airports, has commenced relatively recently.
8 Booz Allen Hamilton, Strategy + Business, issue 46, Spring 2007.
4
 required infrastructure investment. Further, governments • Regulators: Regulated electricity, natural gas, and water
are working to implement best practices in their regulatory and sewerage utilities have periodic “rate cases” where reg-
institutions, ranging from transparency to predictability. ulators determine the allowed return on equity based on the
Lowering the regulatory risk for private investors lowers the necessary capital and maintenance expenditures. All of the
risk premium, reducing costs and creating long-term benefits variable costs, such as the cost of wholesale natural gas or
for the end-users through lower rates and tariffs. electricity, are passed through to end-users.

Most infrastructure assets are natural monopolies—assets • Concession agreements: Mainly used for public-private
with relatively high fixed costs, and low variable costs. By partnerships in the transportation sector, concession agree-
definition, a natural monopoly exists when one provider can ments define the upper limits on rate or toll increases that
serve that market at a lower cost than multiple providers. the concessionaire can charge. The rate increases are usu-
For example, it does not make economic sense to construct ally linked to inflation, and in the case of deferred mainte-
a second set of electric cables, or water or gas pipes to serve nance of a previously publicly-owned asset, allow for the
one neighborhood. Similarly, a second highway, airport, or recovery of maintenance costs.
even a power generation plant is economical only if the • Long-term contracts: Regulated electricity utilities have
existing asset is capacity-constrained. Since infrastructure mandates to provide long-term resource plans to the regu-
assets are providing essential services, regulators ensure that lators, based on reliability and minimum-cost characteris-
the owners do not charge monopoly prices to the end-users, tics. Qualifying power generators, especially generators
but rather that owners are compensated sufficiently to that produce energy from clean sources, usually have 20+
maintain the assets and provide reliable service, while keeping year contracts where payments depend on availability and
the costs to end-users at affordable levels. can be indexed to inflation.

Infrastructure assets can provide protection To demonstrate this inflation-protection characteristic, we

analyzed how the annual cash flows (measured by EBITDA) of
against inflation
256 mature infrastructure assets in the U.S. and EU-15 per-
Whether they are determined by the regulators, concession formed from 1986–2006. Cash flows grew steadily, at a rate
agreements, or long-term contracts, the rates that are above inflation (as measured by the Consumer Price Index)
charged for usage of infrastructure assets are usually linked regardless of the global economic environment.9
to inflation in the long run. Specifically, revenues of infra-
structure assets are determined by:

Exhibit 6: EBITDA for an equally weighted infrastructure portfolio compared to U.S. and EU-15 CPI average,
1986–2006
300
Economic slowdown Infrastructure portfolio
250 CPI average

200

150

100

50

0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Sources: J.P. Morgan, FactSet, FAA, FHWA, MARAD, Eurostat, OECD, IMF, and company website. The above chart is shown for illustrative purposes only.
The data is not adjusted for exchange rate changes.
9 “Infrastructure Investing: A Portfolio Diversifier with Stable Cash Yields,” J.P. Morgan Asset Management.

5
Key risks Greenfield investments
The history of greenfield infrastructure investing is rich with
Sub-sector risk examples of underperformance as a result of cost overruns,
Each infrastructure sub-sector has unique risks. Sub-sectors completion delays, usage shortfalls, longer than expected
are regulated by different governing bodies. They have varied demand ramp-up periods, etc. However, there are also exam-
economic sensitivities (e.g., a seaport is more dependent on ples of greenfield projects succeeding beyond the initial
trade and economic activity than residential water usage) and expectations, or because the risks of start-up and ramp-up
varied dependencies on the availability of natural resources. were mitigated by appropriately allocating them to parties
As one would suspect, bridge or air traffic has a very low cor- best suited to manage such risks. There are basically two
relation to residential electricity or water consumption. types of risks involved in greenfield infrastructure investing:
(i) the completion risk, due to construction delays, cost over-
As shown in Exhibit 7, correlations among sub-sectors are
runs, or bureaucratic red-tape; and (ii) the usage risk, due to
relatively low, so much of this sub-sector risk can be mitigat-
insufficient demand for the service that the infrastructure
ed by creating a well-diversified infrastructure portfolio.
asset will provide once it is built.

Political and regulatory risk Investors can largely avoid greenfield investment risks by
As previously mentioned, infrastructure assets are essential investing only in mature assets with stable operating histo-
for the functioning of a society, and hence governments con- ries or funds that are focused on development only to the
tinuously monitor and regulate them. The regulatory environ- extent that it involves replacing an existing asset. If an inves-
ment can vary significantly from one authority to another, so tor wants greenfield exposure, there are often ways to miti-
managers must have a strong understanding of political gate the associated risks. Experience shows that completion
developments and experience in assessing regulatory risk. risk can be mitigated by aligning the interests of involved
Regulated utilities can have unfavorable rate cases where parties and carefully crafting concession agreements or pub-
regulators may reduce the returns on equity without any jus- lic-private partnerships. Usage risk, on the other hand,
tification. In some extreme cases, especially in jurisdictions depends on the nature of the project, the existence of close
where the rule of law is not well-established, regulators can substitutes, and preferences and habits of potential end-
claim underperformance and try to re-possess an asset. users. Comprehensive research and economic analysis can be
used to help understand and mitigate those risks faced by
Investors can mitigate this risk through the decision of where each individual project. However, each infrastructure asset is
to invest. This decision requires a keen understanding of vari- unique, and inference based on experience in comparable sit-
ous geographies, political, regulatory and legal environments. uations can result in a relatively high margin of error.
Additionally, a manager’s investment strategy and relation-
ship with the regulators can help reduce this risk. All else Liquidity
being equal, government regulators view long-term investors
Infrastructure investments can be less liquid than many other
more favorably than investors who have short-term holding
assets and are best suited for a long-term investment strategy.
periods (i.e., closed-end fund structures) and are trying to
Individual infrastructure assets are usually larger in value
maximize profits in the short-run, potentially to the detri-
than real estate assets and have a smaller universe of potential
ment of end-users.
buyers. Because of the extensive due diligence effort and

Exhibit 7: Correlation coefficients of annual cash flow growth rates of U.S. infrastructure sub-sectors, 1986 to 2006
Electric companies Gas companies Water and wastewater Toll roads Airports Seaports
Electric companies 1.00 0.14 0.23 0.01 0.17 0.01
Gas companies 1.00 0.31 0.01 0.05 0.06
Water and wastewater 1.00 -0.09 -0.03 0.12
Toll roads 1.00 0.42 0.09
Airports 1.00 0.40
Seaports 1.00
Source: J.P. Morgan Asset Management. The above table is shown for illustrative purposes only.

6
 regulatory approval these assets typically require, divestiture approach also adds exchange rate volatility to returns.
of an infrastructure asset may take a considerable amount of Exchange rates, especially between currencies of similarly-
time and substantial resources. developed countries, generally revert to the mean in the long
run, so for long-term investors in core and core-plus invest-
Investors can gain exposure to infrastructure assets through
ments, short-term exchange rate fluctuations have less
a number of vehicles with varying liquidity terms. Open-
importance. Depending on availability of information, it is
ended funds generally take a very long-term investment
often possible for investors to cost-effectively hedge this
approach and will not be forced to divest an asset simply
exposure with a currency overlay. Additionally, investing in
because the fund may be nearing the end of its term. Open-
a fund with explicit diversification guidelines limiting over-
ended funds which offer redemption privileges may provide
concentration to specific geographies can help to lessen
investors more liquid exposure to infrastructure relative to
these risks.
closed-end funds.

An emerging investment strategy Conclusion

Infrastructure is a relatively new asset class. Even in the In today’s extremely volatile markets, investors are increas-
developed world, there is limited available data on its histori- ingly considering allocations to infrastructure. These assets
cal performance. Investors trying to make portfolio allocation generally have monopolistic positions and provide essential
decisions cannot easily compare and rank infrastructure services in the areas in which they operate. As a result,
assets against other investment alternatives. One option for demand for these services is relatively insensitive to economic
investors is to develop informed estimates of the financial weakness and price increases. Additionally, regulators
performance. Given that rates are determined by regulated usually allow private owners of infrastructure to earn fair real
returns and long-term contracts, estimation of usage patterns returns in order to incentivize them to provide adequate
becomes essential in this method. Another alternative is to service to the public—regardless of the economic or inflationary
use existing (but still limited) Australian, listed-equity data environment. Infrastructure assets have produced stable, pre-
and examine the relationship of infrastructure investments dictable and growing returns that in some cases have provid-
with other asset classes in those markets.10 Finally, as previ- ed an inflation hedge by being linked to price levels via either
ously discussed, investors can use historical cash flows to a regulated return framework or a contracted rate of return.
model historical returns for allocation purposes.11
The low volatility of demand and inherent inflation protection
Credit markets characteristics of infrastructure assets result in their low
The cash flow potential of infrastructure assets may present correlation to other major asset classes. These assets provide
opportunities to boost return on equity via leverage at the investors with an attractive diversification opportunity and
operating company level. Credit market conditions impact the the possibility to materially improve a portfolio’s risk-adjusted
amount, cost and terms of credit available to infrastructure return. Demand for infrastructure assets has increased,
assets. Managers can mitigate this risk by making conservative particularly with institutional investors, because they are a
refinancing assumptions when underwriting, and employing good match for defined-benefit pension liabilities, endowment
leverage prudently—in quantity, structure and tenor. and foundation obligations, and annuity and life insurance
liabilities.
We believe that the defining attributes of infrastructure
assets make this asset class relatively well-positioned to There are several risks in infrastructure investing, but as
weather a turbulent credit market environment. Core infra- discussed, they can be mitigated by investors and managers.
structure assets have generated low volatility and steadily Infrastructure managers must have expertise in a variety of
growing cash flows regardless of economic conditions, making sub-sectors and regions with intimate knowledge of various
infrastructure loans much less risky than most other types regulatory frameworks in order to successfully underwrite
of loans. and to later manage these assets. Additionally, the type of
vehicle (we advocate the perpetual, open-end structure)
Currency volatility through which investors gain exposure to infrastructure, can
serve to mitigate liquidity and capital market risks while
While diversification of infrastructure investments across
offering investors exposure to this attractive asset class.
countries generally provides benefits to a portfolio, such an

10 “Infrastructure: A Growing, Real Return Asset Class”, Mark A. Weisdorf, CFA Institute 2007.
11 “Infrastructure Investing: A Portfolio Diversifier with Stable Cash Yields”, J.P. Morgan Asset Management.
7
Appendix
Appendix A: Usage volatility of infrastructure sectors versus volatilities of U.S. real non-discriminating consumption and equity returns,
July 1998 to June 2008
Annual volatilities based on monthly data
20% Equities
18%
16% Non-discretionary
consumption (USD)
14%
12%
Infrastructure
10% usage (units) Highly correlated
with weather
8%
6%
4%
2%
0%
S&P MSCI FTSE MSCI Groceries Clothing Drugs Electricity Water Miles Enplane- Natural
500 World 100 Europe driven ments gas
Sources: Bloomberg, [Link], U.S. Energy Information Administration, U.S. Bureau of Transportation Statistics, Eurostat, J.P. Morgan. Electricity,
natural gas and water usage is based on residential and commercial sectors only.

Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to
change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described
may not be suitable for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be,
and should not be interpreted as, recommendations. Indices do not include fees or operating expenses and are not available for actual investment. The information
contained herein employs proprietary projections of expected returns as well as estimates of their future volatility. The relative relationships and forecasts contained
herein are based upon proprietary research and are developed through analysis of historical data and capital markets theory. These estimates have certain inherent
limitations, and unlike an actual performance record, they do not reflect actual trading, liquidity constraints, fees or other costs. References to future net returns are
not promises or even estimates of actual returns a client portfolio may achieve. Certain information contained in this white paper constitutes “forward-looking
statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,”
“continue,” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results
or the actual performance of an infrastructure investment may differ materially from those reflected or contemplated in such forward-looking statements.
RISKS: Investing in infrastructure assets may be subject to a variety of risks, not all of which can be foreseen or quantified, including operating, economic,
environmental, commercial, currency, regulatory, political and financial risks. There is no assurance that the investments will be profitable or generate cash flow
sufficient to provide a return. An investment in an infrastructure fund is subject to certain risks related with the ownership of infrastructure and infrastructure-related
assets in general, including: local, national and international economic conditions; the supply and demand for services from and access to infrastructure. Although
infrastructure investment may generate some current income, they are expected to be generally illiquid. In addition, public sentiment and political pressures may affect
the ability of a fund to sell one or more of its infrastructure assets. As a result, it may be difficult from time to time for the fund to realize, sell or dispose of an asset at
an attractive price or at an appropriate or in response to changing market condition.
J.P. Morgan Asset Management is the marketing name for the asset management business of JPMorgan Chase & Co. Those businesses include, but are not limited to,
J.P. Morgan Investment Management Inc., JPMorgan Investment Advisors Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset
Management, Inc.
[Link]/insight © JPMorgan Chase & Co. 2009 IM_INS_Infrastructure_Jan_09