Infrastructure Investments Regulatory Treatment and Optimal Capital Allocation Under Solvency II 1st Edition Fabian Regele (Auth.)

Infrastructure Investments Regulatory
Treatment and Optimal Capital

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Fabian Regele (Auth.)
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Fabian Regele
Infrastructure
Investments
Regulatory Treatment and Optimal
Capital Allocation Under Solvency II
BestMasters
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Fabian Regele
Infrastructure
Investments
Regulatory Treatment and Optimal
Capital Allocation Under Solvency II
Fabian Regele
Frankfurt am Main, Germany
BestMasters
ISBN 978-3-658-20163-0 ISBN 978-3-658-20164-7 (eBook)
https://doi.org/10.1007/978-3-658-20164-7
Library of Congress Control Number: 2017959882
Springer Gabler
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Preface
Infrastructure investments are frequently characterized as long-term investments generating

stable cash flows, offering a good diversification potential as well as a sound protection against
inflation. These attributes indeed might be very attractive for some institutional investors like
insurance companies, as they promise a potential escape from the rising threats of the prevailing
low-interest rate trap.
Furthermore, Solvency II as the new regulation regime for the European insurance industry also
exerts a strong influence on the investment decisions of insurance companies, forcing them to
generally narrow the industry´s typical duration gap. Since long-term sovereign bonds are
currently not able to realize adequate returns, an investment in unlisted infrastructure equity can
be a promising approach for realizing sufficient returns while contributing to a better duration
matching of assets and liabilities.
However, resulting from the immaturity and heterogeneity of the entire infrastructure asset class
in conjunction with the prevailing lack of market data, the current literature does not provide
clear evidence about a generalized definition of infrastructure assets, their typical characteristics
or their risk-return profiles on an aggregated level. Moreover, there is still a considerable
uncertainty about the future shape of the infrastructure sector, particularly in the context of
changing economic and social demands for infrastructure assets and the interdependency
between public and private financing.
From an investor-oriented view, the performance of an insurance company´s portfolio investing
in an usually illiquid asset like unlisted infrastructure equity, the asset´s contribution to the
portfolio´s overall riskiness and the question of the portfolio´s optimal asset allocation under
solvency requirements is not yet clear. With regard to regulatory policy, the appropriateness of
the corresponding capital requirements to cover potential losses stemming from such
infrastructure assets is still questionable.
Therefore, this book aims to shed some light on the appropriateness of the current regulatory
treatment and the general suitability of unlisted infrastructure equity investments for the
investment purposes of insurance companies. Due to the ongoing debates about this topic
among supervisors, politicians, researchers and investors, the book comprises insights up to the
middle of the year 2016. In the context of this publication, I want to thank everyone who
supported me during my studies and the preparation of my master’s thesis. I am particularly
grateful to Prof. Dr. Helmut Gründl as the supervisor of my thesis and to the team of the
International Center for Insurance Regulation (ICIR), whose research interest in insurance and
insurance regulation made it possible for me to work on the important and contemporary topic
of infrastructure investments in the insurance sector.
Table of Contents
List of Figures .......................................................................................................................... IX

List of Tables ............................................................................................................................ XI
List of Abbreviations ............................................................................................................. XIII
1 Introduction .......................................................................................................................... 1
1.1 Research questions ......................................................................................................... 2
1.2 Research approach .......................................................................................................... 3
2 Overview of the infrastructure asset class .......................................................................... 5

2.1 Current market situation for infrastructure investments ................................................. 5
2.2 The risk-return profile of direct infrastructure assets ................................................... 15
3 Regulatory treatment of direct infrastructure assets ...................................................... 25

3.1 Solvency II and its solvency capital requirement at a glance ....................................... 25
3.2 Direct infrastructure assets under Solvency II .............................................................. 29
4 Optimal capital allocation and solvency capital requirements for the insurance
company ............................................................................................................................... 37
4.1 Valuation model of a direct infrastructure asset ........................................................... 37
4.1.1 Model framework ............................................................................................... 37
4.1.2 Sensitivity analysis and findings ........................................................................ 45
4.2 Dynamics of the insurance company´s balance sheet items ......................................... 47
4.3 Optimal asset allocation under solvency requirements ................................................ 50
4.3.1 Model framework under the VaR approach ....................................................... 50
4.3.2 Solvency capital requirements using the Solvency II standard formula ............ 54
4.3.3 Analysis and findings ......................................................................................... 59
4.4 Optimal capital charge for the infrastructure´s sub-module in the equity risk´s
module .......................................................................................................................... 66
4.4.1 Model framework ............................................................................................... 66
4.4.2 Analysis and findings ......................................................................................... 67
5 Discussion of the results ..................................................................................................... 69
6 Conclusion ........................................................................................................................... 71
List of References ................................................................................................................... 73
Appendix ................................................................................................................................. 79
List of Figures
Figure 1: Modular approach of the SCR-determination........................................................... 28
Figure 2: SCR as residual net equity stake from the stressed balance sheet ............................ 28
Figure 3: Time depending cash flow stream of the infrastructure asset ................................... 38
Figure 4: Two sample J-curve effects of the infrastructure asset´s cumulative cash flows ..... 46
Figure 5: The insurance company`s stylized balance sheet based on market values ............... 48
Figure 6: Evolution of the portfolio´s solvency capital requirements ...................................... 65
Figure 7: The portfolio´s SCR under a new risk charge for the infrastructure asset................ 68
List of Tables
Table 1: Infrastructure categorization using the sector approach............................................... 9

Table 2: Infrastructure categorization using the investment vehicle approach ........................ 11
Table 3: Major risk factors for direct infrastructure assets ...................................................... 17
Table 4: Comparison of returns and volatilities (p.a.) of major asset classes in percent ......... 21
Table 5: Correlation coefficients of direct infrastructure assets with other asset classes ........ 22
Table 6: Current capital charges for infrastructure equity investments under Solvency II ...... 31
Table 7: Parameters applied for the calibration of the infrastructure asset´s base case ........... 45
Table 8: Overview of the observed effects on the infrastructure asset .................................... 47
Table 9: Correlation matrix used for the stochastic processes ................................................. 50

Table 10: Parameters applied for the calibration of the portfolio´s base case ......................... 60
Table 11: The insurance company´s optimized portfolio for the base case scenario ............... 61
Table 12: Risk-free to risky asset multiples for different infrastructure weights..................... 62
Table 13: Overview of the observed effects on the insurance company´s portfolio ................ 64
List of Abbreviations
AnlV Verordnung über die Anlage des Sicherungsvermögens von Pensions-

kassen, Sterbekassen und kleinen Versicherungsunternehmen (Anlage-
verordnung)
BSCR Basic Solvency Capital Requirement
CAPM Capital Asset Pricing Model
CIR Cox-Ingersoll-Ross-model
DAX Deutscher Aktienindex
DCF Discounted Cash Flow
EEA European Economic Area

EIOPA European Insurance and Occupational Pensions Authority
GBM Geometric Brownian Motion
GDP Gross Domestic Product
LPE Limited Purpose Entity
MCR Minimum Capital Requirement
NPV Net Present Value
OECD Organisation for Economic Co-operation and Development
ORSA Own Risk and Solvency Assessment
PPP Public Private Partnership

PV Present Value
QIS Quantitative Impact Study
SCR Solvency Capital Requirement

SDE Stochastic Differential Equation
SPV Special Purpose Vehicle
VaR Value at Risk

1 Introduction
Infrastructure investments are frequently characterized as long-term investments generating

stable cash flows, offering a good diversification potential as well as a sound protection against
inflation. These attributes indeed might be very attractive for some institutional investors like
insurance companies, as they promise a potential escape from the rising threats of the prevailing
low-interest rate trap.
In this sense, the ongoing world-wide growth in the economic and social demand for well-
functioning infrastructure assets leads currently to a global underfunding of the entire
infrastructure sector of almost US $ 1 trillion per year. From a European perspective, it is
expected that a cumulative capital demand for infrastructure investments of about EUR 1
trillion emerges until 2020. Due to tight public budgets remaining from the last financial crisis,
and the risk that an underfinanced infrastructure sector can severely endanger an economy´s
competitiveness and its ability to generate a high level of social welfare, governments are under
strong pressure to continue or even to intensify the liberalization of the infrastructure sector,
aiming to incentivize the capital market and its institutional investors to finance infrastructure
projects.
Considering the recent developments, the insurance industry as the largest institutional investor
in Europe has gradually shifted its investment focus towards this emerging segment, since it is
considerably suffering from the prevailing low interest period. Especially life insurance
companies in Germany are under strong pressure to realize sufficient returns in order to cover
their large obligations resulting from the high guaranteed interest rates in the past. In addition,
the new regulation regime for the European insurance industry, Solvency II, exerts a strong
influence on the investment decisions of insurance companies. Its design generally prefers the
narrowing of the industry´s typical duration gap, which in practice, is increasingly impeded by
the prevailing low level of realizable yields not only for long-term sovereign bonds, but in a
rising manner also for excellently rated corporates bonds, for instance, the recently issued bonds
by Henkel or Sanofi-Aventis. In order to overcome this trap, a direct investment in
infrastructure assets, for example the investment in a toll road or a power grid, can be a
reasonable solution approach, because it allows the insurance company to directly benefit from
the specific characteristics that are commonly perceived to be unique for infrastructure assets.
However, the adequate treatment of infrastructure assets in terms of their risk-return profiles
for insurance companies, especially within the capital requirements imposed by the Solvency
II framework, is still unclear and challenging. The ongoing debates show a distinct discrepancy
between the different aims among supervisors, politicians, researchers and investors, regarding
the infrastructure sector´s evolvement and its regulatory treatment in future. Therefore, this
thesis aims to address some of the open issues and tries to contribute reasonable arguments for
an objective debate.

F. Regele, Infrastructure Investments, BestMasters,
https://doi.org/10.1007/978-3-658-20164-7_1
2 1. Introduction
1.1 Research questions

Resulting from the immaturity and heterogeneity of the entire infrastructure asset class in
conjunction with the prevailing lack of market data, the current literature does not provide clear
evidence about a generalized definition of infrastructure assets, their typical characteristics or
risk-return profiles on an aggregated level. In addition, there is still a considerable uncertainty
about the future shape of the infrastructure sector, particularly in the context of changing
economic and social demands for infrastructure assets and the interdependency between public
and private financing. However, the findings of the emerging scientific research over the last
decade allows to draw first conclusions on these open issues when considering only specific
asset sub-classes. Since direct infrastructure assets as an individual sub-class are increasingly
subject to the investment purposes of institutional investors like insurance companies, they
seem to provide a promising topic for this thesis.
From the perspective of an insurance company, a direct investment in an infrastructure asset,
for example, the investment or the financing of the unlisted equity stake of physical assets like
toll roads or power grids, is commonly perceived to be a valuable investment opportunity, at
least if the asset behaves in a stylized manner. This type of sub-class exhibits the closest relation
to the infrastructure business model of all asset classes currently available on the capital market
and hence allows for the strongest exploitation of the specific characteristics that differentiate
infrastructure assets from any other assets.
The performance of an insurance company´s portfolio investing in an usually illiquid asset like
unlisted infrastructure equity, the asset´s contribution to the portfolio´s overall riskiness and the
question of the portfolio´s optimal asset allocation under solvency requirements is not yet clear.
The need of addressing these issues gains in importance against the background that they have
not been subject to the literature so far and are thus offering a promising field of research.
In addition, the appropriateness of the corresponding regulatory capital requirements to cover
potential losses stemming from such infrastructure assets is still questionable. Despite the recent
changes under the standard formula of Solvency II, its current design and intention to determine
these capital requirements seem to be unnecessarily complex and might evolve as a hindering
factor for the future emergence of the infrastructure sector. Thus, the right treatment of direct
infrastructure assets is still issue of ongoing debates among supervisors, politicians, researchers
and investors, but all of them exhibiting different opinions to some extent.
Consequently, there is a need for a more detailed research on direct infrastructure assets. This
thesis aims to address the following five research questions (RQ) in order to shed some light on
the appropriateness of the current regulatory treatment and the general suitability of direct
infrastructure assets for the investment purposes of an insurance company.
RQ1a: What is the current status of the infrastructure market, which opportunities of investing
in infrastructure assets are currently available and how can they be classified?
RQ1b: What are the current insights about the performance and the riskiness of a direct
infrastructure asset and is it generally suitable for investment purposes of insurance companies?
1.2 Research approach 3
RQ2: How are direct infrastructure assets currently treated under Solvency II and to what extent
is it prudentially justified?
RQ3: How can such an asset be modelled for simulation purposes, especially to reflect the
specificity of its risk-return profile, in order to be consistent with a market oriented, true and
fair-view valuation?
RQ4: How do the performance and the riskiness of an insurance company´s portfolio investing
in an infrastructure asset evolve over time? How do the portfolio´s solvency capital
requirements based on the VaR approach and on the standard formula behave?
RQ5: What is a potentially more appropriate capital charge for the underlying infrastructure
asset under the standard formula of Solvency II?
1.2 Research approach

The research questions RQ1, RQ2 and RQ3 are mainly addressed by means of a qualitative
analysis of the currently vast stream of literature regarding the area of infrastructure assets.
Thereby, the findings primarily inferred by academic literature and to some extent by business
reports are taken into account. The research questions RQ4 and RQ5 are examined by means
of a quantitative analysis using a Monte Carlo simulation.
The thesis is organized as follows. Chapter 2 provides a comprehensive overview of the
findings in literature regarding the current status of the entire infrastructure sector (RQ1a). It
aims to identify its market potential for private investors by clarifying superior trends that are
commonly expected to shape the demand for infrastructure investments in future. Due to the
plurality of classification schemes for infrastructure assets in the literature, it consolidates the
most important classification characteristics in order to provide a comprehensive overview of
the current infrastructure sector and its fragmentation.
Furthermore, the chapter identifies the major risk sources that are common to direct
infrastructure assets and connects them to the typical lifecycle of such assets. Thus, it enables
to attain general insights about the time-variant change of the underlying risk profile of
infrastructure assets. Finally, the chapter ends by presenting the empirical results regarding the
risk-return profiles found in literature and draws several concluding remarks about the asset´s
appropriateness for an investment by insurance companies (RQ1b).
Chapter 3 covers the ongoing debate about the adequate regulatory treatment of direct
infrastructure assets by pointing out the recent changes in the regulatory regime under Solvency
II (RQ2). Therefore, it clarifies the current opportunities for insurance companies to determine
the solvency capital requirement of such an asset under the standard formula and assesses its
appropriateness critically. Furthermore, it highlights a general discrepancy in the treatment of
the equity and interest rate risk for infrastructure assets.
The subsequent chapter 4 comprises the remaining research questions RQ3, RQ4 and RQ5. In
order to perform the quantitative analysis of these questions, the theoretical foundation of a
valuation model for the infrastructure asset by means of a discounted cash flow approach is set
4 1. Introduction
up and evaluated in section 4.1 (RQ3). Thereby, it reflects the main results regarding the asset´s
common risk-return profile previously addressed by RQ1b.
For assessing the performance and riskiness of an insurance company´s portfolio investing in
an infrastructure asset (RQ4), the evolution of an entire balance sheet over time is modeled by
means of a Monte Carlo simulation. The balance sheet basically comprises stochastic processes
for a risk-free asset, a risky asset, the infrastructure asset and the liabilities (section 4.2).
Thereby, the insurance company aims to maximize its net shareholder value as an objective
function while it is subject to specific constraints (section 4.3). Based on the optimized
portfolio´s composition, the rationale behind the infrastructure asset´s influence on the
insurance company´s choice of the optimal portfolio weights is analyzed. Furthermore, a
sensitivity analysis is conducted in order to infer the asset´s general dynamics within the
portfolio.
Finally, the solvency capital requirements are determined by the application of a VaR approach
and the standard formula of Solvency II. Due to the mismatch in the amounts of both capital
requirements, section 4.4 aims to determine a potentially more appropriate capital charge for
the underlying infrastructure asset under the standard formula by means of a VaR approach
(RQ5).
In chapter 5, the quantitative results are critically discussed with a focus on the most important
aspects and by considering the obtained results of the qualitative analysis. Furthermore, it
suggests several starting points to improve the overall quality of the results in further research.
Chapter 6 finally provides concluding remarks.
2 Overview of the infrastructure asset class
Despite the lack of a unique definition of infrastructure assets, its overall asset class principally
comprises physical structures and networks that facilitate basic services for the existence,
competitiveness and further development of both, an economy and a society. 1 It is often claimed
that the ideal infrastructure investment generates predictable, long-term and stable cash flows
that show a low correlation with other investments available on the capital market, protects
against inflation risk and exhibits some kind of monopolistic market characteristics.2 These
properties, if existing in practice, appear to be the desired salvation for institutional investors
like insurance companies, as they mitigate the jeopardy of the prevailing low-interest rate
period. In order to capture that potential, the following sections shed some light on the typical
characteristics that infrastructure investments tend to have in common and clarify the resulting
consequences for their underlying risk-return profiles.
2.1 Current market situation for infrastructure investments

There is some evidence in the literature that in general, increasing infrastructure expenditures
exert a positive influence on an economy´s future growth, especially towards the long run.3 In
this sense, the World Economic Forum (2012) estimates that every dollar spent on functional,
i.e. value adding, public infrastructure will generate an economic return of five to 25 % in terms
of gross domestic product (GDP) growth. 4 Although this interdependence between economic
growth and infrastructure expenditures might act to some extent as a driving force for
governmental spending in the infrastructure sector, there is still a large unmet capital demand
for infrastructure investments around the world, leading to a global infrastructure gap of almost
US $ 1 trillion per year.5 The literature offers a vast variety of different figures on the right
capital endowment for the entire infrastructure sector, but altogether, they finally draw the
picture of a severe discrepancy between the capital´s provision and demand. The OECD (2007)
forecasts that there is a global, cumulative capital need of about US $ 70 trillion until 2030 only
for the publically most important sectors transport, communication, energy and water.6
McKinsey Global Institute (2013) estimates a world-wide capital requirement of about US $ 57
trillion for the same sectors only to keep up with the current expectations of economic growth
until 2030.7 With regard to Europe, the European Commission (2014) estimates a cumulative
capital demand for infrastructure investments in the fields of transport, energy and
communication of about EUR 1 trillion until 2020.8 Considering the amount of expected
1
See Newell/Peng (2008), p. 22; OECD (2007), p. 20; WEF (2012), pp. 2-3.
2
See, amongst others, Inderst (2010), p. 73.
3
See Sanchez-Robles (1998), p. 106; Esfahani/Ramirez (2003), pp. 470-471; Canning/Pedroni (2008), pp. 523-524.
4
See WEF (2012), p. 2.
5
Measured as the difference between capital need and spending, see WEF (2012), p. 1.
6
See OECD (2007), p. 97.
7
See McKinsey Global Institute (2013), p. 1.
8
See European Commission (2014), p. 2.

F. Regele, Infrastructure Investments, BestMasters,
https://doi.org/10.1007/978-3-658-20164-7_2
6 2. Overview of the infrastructure asset class
infrastructure spending, PwC (2014) forecasts a global rise of yearly capital expenditures for
infrastructure assets from US $ 4 trillion in 2012 to US $ 9 trillion by 2025.9
Although all of these figures should be treated as rough estimates depending on many different
economic scenarios, they all have the expectation of an enormous capital demand for future
infrastructure investments in common. This expectation can be further supported by four long-
term trends that seem to exert a major influence on the future deployment of the global
infrastructure needs and thus provide valuable investment opportunities for institutional
investors like insurance companies.10
First, there are fundamentally demographic developments in effect which basically evolve from
two distinctions, population growth and population ageing.11 From the perspective of the
infrastructure sector, a growing and ageing population inevitably requires two capital-intensive
actions, on the one hand, to intensely increase the existing infrastructure capacities and on the
other hand, to build additional ones in order to satisfy the changing needs of the total population.
The pressure stemming from these distinctions can be severe, as for instance, it is expected that
until 2030 about 16 % of the worldwide population will be aged 60 years or over, while this
group accounts for even more than 25 % of total population in Europe.12 Resulting from a
growing proportion of the old-aged people among societies, this trend is likely to emerge as a
tightening condition on public budgets, leading through higher social expenses to an
accelerating decline in remaining public funds for future infrastructure spending. In 2014, the
average proportion of public social expenditures across the OECD countries already reached a
historically high level with about 21.6 % of the GDP.13 Since the public expenditures for
pensions and social welfare are commonly expected to grow for most developed countries, it is
likely that this trend will retain to shrink public funds available for infrastructure investments
and thus, a growing participation of private investors like insurance companies in financing
infrastructure assets seems to be inevitable.
Furthermore, as a result of the recent financial and sovereign debt crises, severe financial
constraints on public budgets of both, developed and emerging countries, have been imposed
in a widely manner. These come into effect, for example, through national debt brakes like they
are implemented in Germany or through higher yield spreads of sovereign bonds, in particularly
for highly indebted countries like Greece.14 Therefore, governments around the world are under
strong pressure to reduce their public debt levels and to consolidate their budgets.15 In case of
the European Union, the average gross debt level relative to GDP raised from 61.3 % in 2004
9
See PwC (2014), p. 6-7.
10
See, amongst others, OECD (2007), p. 21; PwC (2014), pp. 14-19.
11
See OECD (2007), pp. 155-157.
12
See United Nations (2015), p. 3.
13
See OECD (2016a), statistics about social expenditure.
14
See Bundesbank (2014), p. 26 for the development of bond spreads.
15
A good example is Greece and its long-term struggle against the debt burden.
2.1 Current market situation for infrastructure investments 7
up to 85.2 % in 2015,16 leading to average interest payments of about 2.3 % of the GDP.17 In
this regard, Checherita-Westphal and Rother (2012) show that the influence of high public debt
levels on both, the long-term economic growth as well as the governmental investment
behavior, is negative and non-linear.18 Although there is currently some debt relief through the
low interest rate environment for some countries like Germany, the generally increasing public
debt levels in conjunction with a higher social spending are rather likely to negatively affect the
available public expenditures for infrastructure investments in future and can be seen as the
second major trend for a stronger involvement of private investors.
With regard to the long-term economic growth, for which a well-funded infrastructure sector is
clearly a precondition, PwC (2015) estimates a significant change in the global economic order
in terms of national GDP values from the current G7 (USA, Japan, Germany, United Kingdom,
France, Italy, Canada) to a new group of emerging economies, called E7 (China, India, Brazil,
Russia, Indonesia, Mexico, Turkey) in 2050.19 Measured at purchasing power parity, the
cumulative GDP of the E7 is expected to be twice that of the G7, whereof based on its national
contributions, China and India are on first and second rank, followed by the USA. 20 This
forecast can be underpinned by academic literature, for example, Jorgenson and Vu (2013),
who point out a similar change in the global economic order until 2020.21 Therefore, the
emerging economies are expected to account for about half of global infrastructure expenditures
over the next decades and hence generate an enormous capital demand for financing
infrastructure assets.22 In combination with constrained public budgets even in these countries,
the covering of this capital need is likely to offer a wide variety of valuable investment
opportunities for insurance companies and builds the third trend.
The last major trend can be found in a growing public sensitivity to the environmental status.
For the infrastructure sector, this sensitivity implies a need for action not only limited to a
reduction of environmental pollution caused by the infrastructure systems, but also for
increasing the resilience of existing infrastructure assets to adverse natural outcomes and
disasters.23 Hence, it is likely that the current shift in the investment focus of several major
institutional investors towards environmental issues will continue in future and tie their
investments more strongly to an environmental context.24 This expectation can be supported,
for instance, by the growing effort of Scandinavian funds for divestment in polluting
infrastructure assets or by data provided by Preqin (2016a), showing that the majority of global
16
See Eurostat (2016a), statistics about general government gross debt.
17
See Eurostat (2016b), statistics about general government gross debt w.r.t. interest payable.
18
See Checherita-Westphal/Rother (2012), p. 1403.
19
See PwC (2015), pp. 8-10.
20
See PwC (2015), p 3.
21
See Jorgenson/Vu (2013), pp. 398-399.
22
23
24
See OECD (2007), pp. 162-167.
infrastructure deals over the last few years has already been completed in the field of renewable
energy.25
These four superior trends are commonly expected to strongly challenge the future evolvement
of infrastructure investments.26 Since a government´s ability of financing infrastructure
investments through taxation is limited, it is inevitable for governments in future to increase the
privatization among public infrastructure assets, liberalize the structures of the infrastructure
market and to incentivize private investors to meet these four long-term challenges under
governmental supervision. As stated by the OECD (2007) and by Kikeri and Nellis (2004),
governments basically need to change their future role from an exclusive investor in
infrastructure towards a prudent supervisor who sets up attractive financing conditions for
private investors and only stipulates the major aims under which private investors fund
infrastructure assets.27
In this regard, there is already an increasing political effort to incentivize capital markets for
financing infrastructure investments, for instance, through the introduction of the Europe 2020
Project Bond Initiative starting in 2012 by the European Union that aims to foster infrastructure
debt investments.28 Despite these first public programs, the current market for infrastructure
assets cannot be seen as established, since private investors willing to fund infrastructure
investments lack a standardized access to the various types of infrastructure investments. In
order to overcome this obstacle, there are first efforts for a generalization of single market
segments emerging in the literature. The extensive review of this literature stream has pointed
out that there are three different main approaches commonly used to categorize the currently
extremely heterogeneous infrastructure asset class into several major asset sub-classes. Every
approach emphasizes different characteristics and risks of the underlying infra-structure asset,
but if considered together, as intended in this thesis, these approaches are expected to provide
a comprehensive overview of the infrastructure market´s current fragmentation.
The first approach categorizes infrastructure investments by the field of their operating business
sector (sector approach). This perspective distinguishes between economic infrastructure assets,
meaning physical systems that enable the basic functioning of the economy and society, and
social infrastructure assets, which refer to systems and institutions that provide services
essential for the continuity of a society (see Table 1). The field of economic infrastructure
mainly includes the sectors transport, utilities and communication, whereas social infrastructure
comprises the sectors health, education, security, culture, administration and retirement.
Potential investors need to consider at first the suitability of the preferred business sector for
their investment purposes, since all sectors can differentiate heavily in terms of, for example,
risk sources, market competition or geopolitical factors that ultimately affect the investment´s
expected return. Thus, it is difficult to draw a general conclusion about the eligibility of
individual sectors, but, because investments in social infrastructure are usually subject to severe
constraints, for example, in terms of a regulatory return cap or a compulsion for regularly capital
25
See The Guardian (2016) and Preqin (2016a), p. 1.
26
See e.g. OECD (2007), p. 14.
27
See OECD (2007), pp. 30-31 and Kikeri/Nellis (2004), pp. 113-114.
28
See European Union (2012), Regulation No 670/2012.
injections by the investor, infrastructure assets among this sector might be rather inappropriate
for insurance companies.
Table 1: Infrastructure categorization using the sector approach
Economic infrastructure Social infrastructure
Transport Utilities Communication Health Education Security
- Ground: - Energy, Water, - Cable - Hos- - Schools, - Prisons,

Heat supply: networks pitals Universities Police
Roads, Rails,
- Satellites
Bridges, Public Oil, Gas, Coal,
- Radio stations Culture Administration Retire-
transport Renewable energy
sources ment
- Water:
- Energy - Parks - Adminis- - Retire-
Ports, Water
distribution: - Sports trative ment
routes
buildings buildings homes
Power grids,
- Air: - Courts
Energy storage
Airports
- Waste
management
Source: Own table, based on Gatzert/Kosub (2014), p. 353 and Kleine/Krautbauer/Schulz (2015), p. 81.
The second approach separates infrastructure investments according to their maturity

(investment stage approach). Infrastructure investments at an early stage are commonly
considered as greenfield assets, whereas investments at a later stage as brownfield assets.29 This
separation can be seen as a first risk-sensitive classification of infrastructure investments,
because it differentiates the asset´s risk exposure depending on its stage on the lifecycle, which
can be usually divided into four separate phases. At first, a design and planning phase builds
the technical foundation for every infrastructure asset, which is followed by a capital-intensive
construction phase in order to enable the investor with the ability to realize cash flows during
the operating phase. The end of this lifecycle is usually represented by a decommissioning
phase, during which the asset usually loses heavily in value due to fewer remaining operating
periods and higher maintenance costs.30
Comparing greenfield to brownfield assets, the former type of asset does either not exist or only
stands at an early project stage, so that it still needs to be constructed, which typically adds a
plenty of additional risk sources to those mandatory for the operating phase.31 Brownfield assets
usually refer to assets that are already established and generate cash flows, hence they do not
include any design and planning or construction risks and can provide more information for
potential investors in terms of, for example, demand patterns about the asset´s underlying
business model, insights about the market dynamics or its regulation.32 Therefore, the asset´s
29
See Oyedele/Adair/McGreal (2014), pp. 3-4.
30
See Gatzert/Kosub (2014), p. 353; Ehlers (2014), p. 5.
31
See Oyedele/Adair/McGreal (2014), pp. 3-4.
32
See Bitsch/Buchner/Kaserer (2010), p. 112.
lifecycle status as a distinctive feature highlights brownfield assets as less risky than greenfield
assets, but in turn, they also realize lower returns for the investor.33 From the perspective of an
insurance company as a risk-averse investor, brownfield assets seem to be a rather suitable
investment choice, since the recent history provides good examples for the financial jeopardy
of the greenfield assets´ construction phase (e.g. the Berlin airport).
The third categorization approach of infrastructure investments is based on the final investment
vehicle that is used for the investor´s acquisition process (Table 2, investment vehicle
approach).34 Considering the scattered insights among the literature, it seems to be useful to
subsume these by a three-step approach in order to illustrate the complexity of the investor´s
current decision process for financing an infrastructure asset. At first, there is the investor´s
basic distinction between an equity or debt investment in the preferred infrastructure sector
(capital type), for example, the investment in stocks or bonds, which is followed by the choice
of a preferred degree of the investor´s own influence on the asset (investment type), for instance,
a direct or indirect investment through funds, and as the final step, there is the selection of the
preferred degree of standardization underlying the acquisition process, for example, buying the
targeted combination of capital and investment type as a listed or unlisted asset (investment
vehicle).
Due to the extreme complexity of this three-step approach, it is not possible to conclude a
general eligibility of any combination over the others for insurance companies (Table 2). All of
them exhibit different characteristics, especially in terms of their risk and return contribution to
the investor´s portfolio or the underlying market depth, leading to the intense heterogeneity of
the infrastructure asset class at an aggregated level. But it clarifies the current challenges an
investor is subject to when deciding on financing infrastructure, which, altogether, require a
deep understanding of the infrastructure market and its complex dynamics. Therefore, the
following section explains each investment vehicle in greater detail in order to comprehend and
assess some of these issues.
33
See Oyedele/Adair/McGreal (2014), pp. 3-4 and Bitsch/Buchner/Kaserer (2010), p. 123.
34
See, for example, Gatzert/Kosub (2014), pp. 354-358.
Table 2: Infrastructure categorization using the investment vehicle approach (Part I)
Capital Vehicle Listed Asset Unlisted Asset

Type Type
Stocks: Unlisted equities / PPPs:

x Market depth: x Market depth:
Deep capital markets available Limited opportunities
x Liquidity: x Liquidity:
High Low, usually less exit options
Direct x Know-how requirement: x Know-how requirement:
Capital market know-how High, specific project and
business model know-how
x Diversification potential:
Low, usually high correlation x Diversification potential:
with other equity assets in the Rather high due to stable cash
market flows
Equity Listed equity funds: Unlisted equity funds:
Limited market Limited market
x Liquidity: x Liquidity:
Medium Low to medium
Indirect x Know-how requirement: x Know-how requirement:

Capital market know-how High, specific sector and business
model know-how
Low, usually high correlation of x Diversification potential:
the fund´s portfolio with other Basically, rather high level, but
equity assets depending on assets´ sectors and
regions
Table 2: Infrastructure categorization using the investment vehicle approach (Part II)
Capital Vehicle Listed Asset Unlisted Asset

Type Type
Corporate Bonds: Project Loans / Project Bonds:

Limited capital market High supply, but mainly
dominated by banks
x Liquidity:
High x Liquidity:
Low, no secondary market yet
x Know-how requirement:
Direct
Fixed-Income and business x Know-how requirement:
model know-how Credit market and business know-
Debt how
Rather low, usually high x Diversification potential:
correlation with other bonds in Rather high due to direct link to
the market stable infrastructure business
models
Bond funds / Loan funds:

For this segment, there are only few market offers available (around
Indirect
40 funds in 2012) which do not provide sufficient track records and
data for proper performance assessment according to the literature.
Source: Own table, based on Gatzert/Kosub (2014), pp. 354-358; Kleine/Krautbauer/Schulz (2012), pp. 27-28, pp.
58-60; Bitsch/Buchner/Kaserer (2010), pp. 109-110.
For the field of direct equity investments, the investor can basically choose between an
investment in a listed equity stake of a company whose business model is related to the
infrastructure sector or an investment in an unlisted and hence private equity stake of an
infrastructure company or physical asset. The former type of asset relates to publically traded
stocks which are usually relatively liquid, require only profound capital market knowledge and
their performance is usually correlated to a certain degree with the overall market
performance.35 Therefore, the properties of this asset sub-class are relatively similar to those of
other listed equities. The latter one comprises direct capital investments in physical assets such
as, for instance, toll roads, power plants or power grids, which can be acquired and managed
by investors on their own behalf or in share with a government in case of a more specific
investment structure like a public private partnership (PPP).
PPPs are characterized by a certain form of cooperation between a private investor (often
bearing the design, planning and construction risk) and the government (often bearing the
demand, pricing and inflation risk) which is contractually arranged for a certain length of time.36
35
36
See OECD (2007), p 32; for a comprehensive overview see Grimsey/Lewis (2002).
A well-negotiated PPP can be advantageous for both parties, the private investor who mitigates
some specific risk factors to the public partner, and the government which can reduce its public
expenditures for infrastructure. However, it is not possible to generalize the economic
performance of PPP structures, because it highly depends on the exact risk allocation and tariff
structure between both parties underlying each deal.37
In general, direct investments in unlisted infrastructure equity as an individual sub asset-class
are usually characterized by the requirement of large capital commitments as well as a profound
knowledge about the assets´ underlying business models and its sectors. 38 In addition, the
commitments usually underlie long time horizons accompanied by only a few possible exit
options for investors, which characterizes the investment as rather illiquid and to be more risky
compared to their listed or indirect counterparts within the infrastructure market. 39 However,
due to their direct relation to infrastructure business models, which is shown by Bitsch (2012)
to generally provide more stable cash flows than non-infrastructure business models, these
investments can be considered as rather eligible for portfolio diversification purposes.40
Indirect equity investments through the investor´s participation in a public or private fund
investing in either listed or unlisted infrastructure equity stakes, represent an alternative
approach for even smaller investors to engage in the field of infrastructure. The main motives
for investors to select this type of investment are, for instance, to participate in the relatively
stable infrastructure business models while providing an usually lower capital commitment than
for direct investments, a lower degree of own asset management duties as investors often act as
limited fund partners and finally, to be endowed with several, standardized exit options
depending on the fund´s legal framework (e.g. regulated withdrawal of money, sale of
partnership to a secondary investor etc.).41 The diversification potential of this type of asset for
institutional investors like insurance companies depends highly on the regionally and sector-
specifically clustering of infrastructure investments within the fund´s portfolio, but can be
considered as relatively advantageous in contrast to other types of investments on the capital
market.42
In case of debt investments, the market currently offers only direct investments to a sufficient
extent.43 These can be split between either listed debt assets, for example, listed bonds of
companies associated with the infrastructure business, or unlisted debt assets, for instance,
direct loans or bonds for certain infrastructure projects. It is reported that listed corporate
infrastructure bonds behave rather similar to bonds from non-infrastructure companies in terms
37
For typical PPP contracts in practice, see for example Blanc-Brude (2013), pp. 19-20 and Zhang (2005), p. 657.
38
See, e.g. Bitsch/Buchner/Kaserer (2010), p. 109.
39
See Gatzert/Kosub (2014), p. 354; Finkenzeller/Dechant/Schäfers (2010), p. 266.
40
See Bitsch (2012), p. 209; Kleine/Krautbauer/Schulz (2012), p. 59.
41
42
See Gatzert/Kosub (2014), p. 354.
43
See Kleine/Krautbauer/Schulz (2012), p. 55.
of risk-return when having the same credit rating and maturity, thus offering a low exploitation
of the potential benefits of the infrastructure business.44
Infrastructure loans in contrast, provide a direct access to infrastructure business models.
Regarding the average cumulative default rates of infrastructure project loans, which measure
the probability of a cohort´s default up to distinct time intervals, these seem not to entirely
reflect the stylized potential of infrastructure assets in terms of cash flows´ stability and
riskiness. Based on recent data and rating categories from Moody´s, such infrastructure loans
are classified in a range between low to speculative investment grade (Moody´s Baa/Ba
rating).45 In contrast, considering the marginal annual default rates, which measure the
probability that a member of a cohort which has survived up to a specific date will default by
the end of that time interval, infrastructure loans seem to reflect the stylized potential of
infrastructure assets only after a certain period of time. Starting with the high levels of non-
investment grade´s marginal annual default rates, the rates for infrastructure loans fall three
years after their closing towards those consistent with upper investment grade loans (Moody´s
A rating).46 The relatively high marginal default rates at the beginning of the infrastructure
loan´s settlement compared to their later values are likely to result from the general high
riskiness of the infrastructure asset´s underlying construction phase, for which the history
provides several examples (e.g. the Berlin airport).47
This comprehensive overview shows that the market for infrastructure investments offers a
plenty of different opportunities for investors to engage in the field of infrastructure. Recent
data highlights that among institutional investors, insurance companies are currently the fourth
largest investor in infrastructure.48 However, regarding their average target aim for their
portfolios´ allocation to infrastructure assets (3.9 %), it deviates significantly from their current
portfolio´s exposure (2.9 %). 49 One rationale behind this mismatch can be found in the still
unclear evidence on the empirical performance and riskiness of infrastructure investments, thus,
resulting in a challenging valuation processes, which is stated to be one of the major problematic
market issues institutional investors are concerned about.50 This is not surprising, since there is
a common complaint among practitioners as well as researchers about the prevailing lack of
sufficient market data for infrastructure investments in order to properly assess their true risk-
return profiles.51
This thesis will focus on direct investments in unlisted infrastructure equity stakes (hereafter
named as direct infrastructure assets) from the perspective of an insurance company, because
44
See Kleine/Krautbauer/Schulz (2012), p. 49.
45
See Moody´s (2013), p. 16 and Moody´s (2011), p. 33.
46
See Moody´s (2013), p. 18.
47
See Moody´s (2013), p. 18.
48
See Preqin (2016b), p. 35.
49
50
51
See e.g. Bahceci/Weisdorf (2014), p. 1.
2.2 The risk-return profile of direct infrastructure assets 15
this type of investment offers the strongest potential to participate in the special properties that
tend to be unique for infrastructure assets. Therefore, this asset class is expected to represent
the currently most valuable investment opportunity for insurance companies in the field of
infrastructure assets. The following section provides scientific results in order to quantify their
market potential as well as their risk-return profiles and hence builds the foundation for an own
valuation model of an infrastructure asset developed in chapter 4.
2.2 The risk-return profile of direct infrastructure assets

It can be generally advantageous for institutional investors like insurance companies to directly
invest in unlisted infrastructure equity and hence own this position in their balance sheets.
According to the literature, direct infrastructure assets, at least in a stylized manner, are
perceived to exhibit features like, for instance, high hurdles for a competitor´s market entry in
terms of capital and business knowledge requirements, a generally long business model
duration, a low correlation of the assets´ returns with other asset classes, an inelastic market
demand pattern for the assets´ underlying business models which provides the ability for a
sound inflation hedge and finally, relatively low default rates.52 Furthermore, it is also
frequently claimed that such infrastructure investments depict some kind of a hybrid asset,
because one the one hand, they tend to combine equity-like returns with bond-like risks and on
the other hand, they show some similarity to real estate investments. 53
Although there are infrastructure investments that seem to satisfy some of these stylized
features quite well, for instance the renewable energy sector in Germany with its feed-in tariff,
a generalization of these features to hold for the entire infrastructure asset class is currently
either not possible or at least challenging due to the prevailing lack of independent market data
and the scarcity of empirical literature regarding the performance of infrastructure
investments.54 Nevertheless, academic research has identified several diverse risk sources that
tend to be typically apparent for direct infrastructure assets and thus, build a suitable starting
point for the assessment of its general risk-return profile.55 However, the impact of these risk
sources on an asset´s total performance can be highly diverse and differs strongly from
investment to investment, since Tables 1 and 2 indicate the high heterogeneity of the whole
infrastructure asset class. In order to comprehend the main risk channels underlying all direct
infrastructure assets, Table 3 aims to aggregate the common risk sources found in literature to
the typical lifecycle stages of such an infrastructure investment.56 By connecting the risk
sources to the different time-variant stages, it is possible to draw a first conclusion about the
general distribution of risks among the total lifetime of such an asset and hence to provide the
theoretical foundation for modelling the infrastructure asset in chapter 4.
52
See Inderst (2010), p. 73; Peng/Newell (2007), p. 424; See Moody´s (2013), p. 18.
53
See Inderst (2010), p. 78; Newell/Peng (2008), p. 25.
54
Private databases mostly used are provided by Preqin, Mercer Investment Consulting or CEPRES.
55
For a comprehensive overview of risks, see, e.g. Inderst (2010), pp. 80-81; Loosemore (2007), p. 71; Bing et al. (2005), p.
28.
56
Typical lifecycles mentioned by, e.g., Ehlers (2014), p. 5.
During the design and planning phase, which typically marks the first phase in the lifespan of
an infrastructure asset, especially site and technical risks seem to appear. Common sources of
risk can be found in challenges with land use and ground condition (e.g. in terms of suitability
for the infrastructure project, its consistence, ground pollution, animal and plant protection,
etc.) or design failures (e.g. in terms of inefficient technical solutions to specific problems
emerging in subsequent stages).57 In order to avoid a significant delay of the remaining lifecycle
phases, high effort should be allocated by investors to the analysis of the risks involved at this
project stage. Significant failures are even more dangerous to the asset´s total realization, since
infrastructure investments are usually subject to a J-curve effect of cash flows, which means
that the asset is not able to generate cash flows to cover any unexpected incoming
expenditures.58 The case of the Berlin airport and its problems with the smoke extraction system
is a good example for the magnitude and tediousness of failures during this stage on the asset´s
overall evolvement and the scope of necessary capital injections made by investors.
The probably most dangerous risk sources seem to appear during the asset´s construction phase,
since any cost overruns during this stage cannot be compensated by operating cash flows and
the termination of the entire construction project is mostly rather capital-intensive. Typical risk
sources according to the literature include site risks, financial risks, regulatory or political risks,
cost overruns and delays in the completion of the construction. All of these aggregated sources
emerge in a plenty of different and individual risk factors which vary in their impact on the
construction phase´s risk contribution to the asset´s total performance. Resulting from the
strong relation between the construction risk and the default risk of infrastructure loans as data
provided by Moody´s (2013) highlight, the construction phase can be regarded as a significant
influence factor for the overall success of the infrastructure asset and thus should be considered
carefully by potential investors and emphasized when modeling infrastructure assets.59
Considering the operation phase, the infrastructure asset during this stage typically generates
first cash flows that are able to compensate the major risk sources appearing at this stage, like
financial risks, regulatory or political risks, business risks and environmental risks. During this
phase, regulatory and political risks might have the most disruptive potential to the asset´s
business model depending on its underlying degree of regulation.60 Recent history points out
how dangerous this threat can be to the total performance of entire infrastructure sectors that
were formerly perceived to be stable and profitable, for instance, the changes in the renewable
energy market in Spain in 2014 or Germany´s nuclear power market due to its phase-out of
nuclear power plants after the incidents in Fukushima in 2011.61 It is obviously that the
magnitude of negative consequences caused by regulatory changes increases with a higher
degree of the business model´s regulatory level. Even if this risk type is difficult to mitigate,
investors should be aware of its disruptive potential and try to reduce its magnitude as most as
57
The sources for the arguments regarding the lifecycle stages are mainly provided under Table 3 for the sake of
comprehensiveness.
58
See Gatzert/Kosub (2014), p. 353.
59
See Moody´s (2013), p. 18; The sources for the arguments regarding the lifecycle stages are mainly provided under Table 3.
60
Preqin (2016b) highlights on p. 38 the field of regulation as one of the major issues for the infrastructure market.
61
For a comprehensive overview of the Spanish renewable energy market see Rojas/Tubio (2015).
possible, for instance, by negotiating suitably contractual frameworks in case of public private
partnerships.
Table 3: Major risk factors for direct infrastructure assets (Part I)
Phase Type of risk Source of risk Impact
Land use, ground condition This risk can reach a high

issues like suitability, level and even lead to project
Site risks pollution, animal and plant termination in case of, e.g.
protection, etc. unsolved environment
protection conflicts, etc.
Design and
Planning Design failure, etc. Inefficient technical
solutions to issues of the
subsequent stages can have
Technical risks extreme financial
consequences, e.g. new
Berlin airport.
See above, but See above.
Site risks unexperienced in the design
and planning phase.
Interest rate shift, inflation Financial risks during the
rate changes, exchange rate construction phase can affect
Financial risks shift, leverage risks, etc. solvency of both, the
investor as well as the
construction contractor.
Design failures, approval A correction of fundamental
delays, material price design failures can be effort-
changes, etc. extensive and expensive. A
Cost overruns delay of required approvals
Construction
at this stage can delay the
completion of the whole
construction phase.
Approval delays, changes in It can require new design
law affecting the conditions elements and delay the
Regulatory/ of the construction or the whole construction phase.
Political Risks operating phases, etc. Further, it can even make the
intended business model
inefficient.
Approval delays, inefficient This risk can lead to high
Delay in
work management, etc. opportunity costs in terms of
completion
unmet demand.
Table 3: Major risk factors for direct infrastructure assets (Part II)
Phase Type of risk Source of risk Impact
See above. These risks can lead to

Financial risks severe financial distress
during operation phase.
See above, plus risk of tariff Tariff changes can endanger
Regulatory/ changes, market the total business model, e.g.
Political risks liberalization, etc. renewable energy market in
Spain in 2014.
Operating cost overruns, These factors can
revenue risk (demand, significantly affect the total
Operating pricing risk), tax changes, performance of the business
Business risks agency conflicts between model. Especially demand
investor and government, risk can be severe, e.g. the
etc. phase-out of nuclear energy
in Germany in 2011.
Natural disaster, pollution, Environmental risk can be
waste, etc. caused by infrastructure
Environmental
projects or these can be
risks
physically affected by
natural disasters.
Less exit options. There is no secondary
market for infrastructure
Illiquidity risks
projects, hence it is difficult
to find a subsequent investor.
Decommissioning Difficulties with valuation of It can be very problematic to
salvage value due to value a project if there is
Pricing/
uncertainty in future uncertainty regarding the
Valuation risks
political/regulatory political/regulatory
environment. environment.
Source: Own table, based on EY (2015), pp. 18-20; Inderst (2010), pp. 80-81; Loosemore (2007), p. 71; Bing et
al. (2005), p. 28.
The decommissioning phase usually refers to risk types such as illiquidity and valuation risks
that on the one hand, also arise during the whole lifespan of an infrastructure investment, but
remain as a more adverse characteristic at the asset´s final lifecycle´s phase when its market
value usually shrinks caused by fewer operating periods. Due to the absence of a secondary
market for direct infrastructure assets, there are only few feasible exit options for investors
resulting in a high illiquidity risk. 62 This in turn, contributes to the lack of market data of
comparable assets and transactions, which further complicates the valuation process of
infrastructure assets, especially if there is uncertainty about major risk factors like political or
62
See, e.g. Finkenzeller/Dechant/Schäfers (2010), p. 266 or Inderst (2010), p. 80; The sources for the arguments regarding the
lifecycle stages are mainly provided under Table 3.
regulatory risk in future. This might work as an additional pressure for investors to hold such
illiquid assets until maturity. However, on the other hand, especially the illiquidity risk can be
in turn a valuable aspect for long-term investors like insurance companies, which are able to
skim an underlying illiquidity premium compared to rather short-term investors.
Although every infrastructure investment is faced with most of these risks, their occurrence and
their precise influence on the asset´s overall performance can highly differ from asset to asset
depending on many diverse aspects like, for example, the business sector or geopolitical factors.
This makes it impossible to aggregate and quantify a general impact of the mentioned risks
applicable to every infrastructure investment during their stages. However, clarifying the time-
variant interdependence between the asset´s lifecycle phases and the underlying risk sources
mentioned by the literature, helps potential investors to thoroughly evaluate the risk distribution
of a potential infrastructure asset in the course of an adequate due diligence process. It can be
concluded that investors should be aware of the severe differences in the magnitude and scope
of the major risk sources emerging during the different lifecycle phases, assess them on an
aggregated stage level and mitigate those risk types using suitable hedging, insurance and
contractual measures.63
The potential to assess a performance pattern of direct infrastructure assets subject to these vast
stream of risk sources is currently limited due to the lack of sufficient market data, but remains
extremely important for evaluating the expected role of such assets within an institutional
portfolio. In order to overcome this obstacle, recent academic literature, however, focuses on
empirically identifying the historical risk-return profile of direct infrastructure investments
which makes it possible to draw several conclusions about the general performance pattern that
most direct infrastructure assets are likely to incorporate.
Thereby, the analyzed performance series in academic research are mainly derived from
investments made by unlisted infrastructure funds and thus typically comprise appraisal-based
data series focusing on rather mature infrastructure markets like in Australia, Canada or the
United Kingdom. Table 4 gives a comprehensive overview of the most relevant empirical
findings so far, which is limited to academic research, since the objectivity of insights available
from several major infrastructure funds and investment banks cannot be guaranteed. In case
that there is no annualized data given, the respective values for return and volatility are
annualized by using standard calculus. Furthermore, it is worth noting that so far, only six
academic studies investigated the performance of direct infrastructure assets in a thoroughly
manner, meaning that the conclusions drawn by these results are still limited, but suitable to
reveal some of the asset´s common risk-return features.
The empirical results show that direct infrastructure assets are generally outperformed by their
listed counterparts in terms of annualized returns, but this superiority is also accompanied by a
higher risk exposure in terms of volatility. However, compared to the other major investment
classes, direct infrastructure assets demonstrate a historically superior risk-return profile. With
regard to the claim whether they show equity-like returns with bond-like risks, it seems that the
63
See, for example, Schaufelberger/Wipadapisut (2003), p. 212, for financial mitigation strategies.
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cases collected by Mouchet, 3 ended in recovery. Another success
has been recently recorded by Turretta. The écraseur has been
used, but its employment cannot be recommended. Compression by
clamps is advised by Schatz of Rostock. Ligation is best adapted to
cases occurring in the cervical and dorsal regions, in which, as
pointed out by Giraldès, nerve-elements are less likely to be
involved. Excision, supplemented by transplantation of a strip of
periosteum from a rabbit, has been successfully resorted to by
Mayo-Robson and by R. T. Hayes of Rochester, N. Y.; and simple
excision, with suture in separate lines of the sac and integuments, by
Mayo-Robson, Atkinson, and Jessop. The Clinical Society's
committee in all refers to 23 cases treated by excision, 16 of which
are said to have been successful.
ANÆMIA AND HYPERÆMIA OF THE BRAIN AND

SPINAL CORD.
BY E. C. SPITZKA, M.D.
Cerebral Hyperæmia.
Up to within a few years it was a favorite mode of explaining the
results of the administration of certain narcotic and stimulant drugs,
and certain of the active symptoms of mental derangement, to
attribute them to an increased blood-supply of the nerve-centres.
This view seemed to harmonize so thoroughly with the physiological
dictum that functional activity depends on the supply of oxygenated
blood that the first attempts at questioning it were treated as
heresies. To-day, however, few authorities can be found to adhere
unreservedly to this once-popular and easy explanation. The drift of
physiological and medical opinion is in the direction of regarding
some subtle molecular and dynamic state of the nerve-elements as
the essential factor in intoxications as well as in maniacal and other
forms of insane excitement: if they be complicated by active or
passive congestions, this is probably a secondary occurrence of
modifying but not of intrinsic determining power. While this change in
our views is the natural result of progress in experimental
pharmacology and pathology, it does not justify the extreme
assertion that there is no disorder of the brain functions deserving
the name of congestion and hyperæmia. This assertion seems to
have been provoked by the careless manner in which these terms
have been employed to designate conditions which are in reality the
most different in nature that can be well conceived. No one familiar
with the extent to which the term “congestion of the base of the
brain” has been abused in this country will marvel that the reaction
provoked by it has overstepped the boundaries of cautious criticism.
That there are physiological hyperæmias of the brain is now
universally admitted; the most recent experimental observations,
indeed, conform most closely to the claims of the older investigators.
It naturally follows that pathological hyperæmias are both possible
and probable, and even if the observations in the dead-house do not
strongly sustain the existence of pathological hyperæmias and
congestions independently of gross disease, clinical analysis and the
gratifying results of appropriate treatment justify us in retaining these
designations in our nomenclature with the limitation here implied.
One great difficulty in determining the precise nature of the disorders

which the physician is called upon to treat on the theory of
hyperæmia lies in the number of factors which may contribute to or
modify its development. If, for example, the action of the heart be
increased through hypertrophy, the result to the cerebral circulation
will obviously be different in a plethoric and in an anæmic person; it
will be also very much different in the event of the stimulation of the
centres which contract the calibre of the cerebral blood-vessels from
what it would be if there were a state of vascular relaxation. Should
the cardiac hypertrophy be associated with renal disease, other
disturbing elements may be introduced, such as arterio-fibrosis, or
the presence in the blood of certain toxic substances having direct
effects of their own on the nerve-elements. The picture may be still
more complicated by variations in the intracranial pressure. It is
impossible to prove, either by direct or indirect evidence, that there is
such a pathological state as a simple cerebral hyperæmia; indeed,
there is one fact which militates strongly against, if it be not fatal to,
such an assumption. Were a physiological hyperæmia to become
intensified to a pathological degree, we should have corresponding
clinical phenomena. In other words, the culmination of the morbid
process should be preceded by an exaggerated physiological
excitation similar to that observed with intoxications. But this is rarely
the case, and we accordingly find that the more cautious writers, like
Nothnagel,1 do not commit themselves to the view that the results of
mental overstrain2 are to be classed as simple cerebral hyperæmia.
Similar restrictions are to be made regarding the established
congestive states, such as those following sunstroke. It has been
usually supposed that insolation directly produces cerebral
hyperæmia, even to the degree of engorgement, and that the after
symptoms in persons who recover are due to the non-return of the
meningeal and cerebral blood-vessels to their normal calibre, and to
other more remote results of vascular stasis. The latter half of this
proposition is in part correct; the former is contradicted by numerous
pathological observations. Thus, Arndt,3 who had the opportunity of
studying over one hundred cases occurring in the course of a forced
march of a division of infantry from Berlin to Pankow, many of which
terminated fatally, found almost uniformly a pale brain, with peculiar
color-changes, denoting rather structural than circulatory trouble.4
The whole list of causes of what is commonly designated cerebral
hyperæmia, congestion, and engorgement may be gone through
with and similar modifying statements be found to apply to them. The
nearest approach to an ideal cerebral congestion is that found with
acute alcoholic intoxication. This is at first accompanied by cerebral
hyperæmia, which, with the comatose climax, becomes an
engorgement; accordingly, many of the results of acute alcoholic
intoxication are attributed to the circulatory condition alone. The
congestive troubles due to alcoholism which come to the special ken
of the physician, however, are those found with the chronic form, and
here a more complex pathological condition is found to underlie it;
the organization of the brain is altered, the vascular channels more
or less diseased, and the vaso-motor mechanism continuously
deranged. This disorder, as well as the apoplectiform states
attributed to vascular stasis, and the active and passive hyperæmias
associated with tumors, meningitic and other gross diseases of the
brain, as well as with the status epilepticus, are usually included in
the discussion of cerebral congestion, and serve to swell up the
chapters devoted to it. They will be found discussed in more
appropriate situations in this volume. In this place it is proposed to
consider only those congestive states which present themselves to
the physician, independently of conditions which, if associated,
preponderate in clinical and therapeutic importance.5
1 Ziemssen's Cyclopædia, “Nervous System,” i. p. 39, 2d German ed.
2 It has repeatedly happened during the past decade that young persons competing
for admission to higher institutions of learning in New York City through the channel of
a competitive examination died with symptoms of cerebral irritation; the death
certificates in several such cases assigned meningitis or cerebral congestion as the
cause of death, and attributed the disorder to mental overstrain. It is not so much the
intellectual effort that has proved hurtful to the pupils as the emotional excitement
attending on all competitive work, the dread of failure, the fear of humiliation, and
anxiety developed by the evident futility of the cramming process. Some years ago I
recorded the results of some inquiries on this head in the following words: “The
mental-hygiene sensationalists, who periodically enlighten the public through the
columns of the press whenever an opportune moment for a crusade against our
schools and colleges seems to have arrived, are evidently unaware of the existence
of such a disease as delirium grave, and ignorant of the fact that the disorder which
they attribute to excessive study is in truth due to a generally vitiated mental and
physical state, perhaps inherited from a feeble ancestry. Our school system is
responsible for a good deal of mischief, but not for meningitis” (Insanity, its
Classification, Diagnosis, and Treatment). Since then I had an opportunity of obtaining
an excellent description of such a case which had been attributed to the combined
effects of malaria and educational overstrain, presenting opisthotonos, fulminating
onset, and an eruption!
3 Virchow's Archiv, lxiv.
4 The observations of Gärntner (Medicinische Jahrbucher, 1884, 1) harmonize with

this. He found that radiant heat contracts the blood-vessels of the frog's mesentery.
5 The same applies to conditions which are discussed under this head in textbooks,
although they have either only a medico-legal bearing or are inconstant factors, such
as the injection of the brain in death from strangulation. I need but instance the
vascular condition of brains of criminals executed by hanging. In the case of one
where the strangulation had been slow I found an engorgement of all the vessels and
arachnoidal as well as endymal hemorrhages; in a second, where the criminal had
been carried half fainting to the drop, and death ensued quickly and without signs of
distress, the brain was decidedly anæmic.
It has been also considered best to omit treating of the collateral hyperæmia of the
brain sometimes found with erysipelas of the face and scalp. This I regard as
essentially of the same nature as the metastatic meningitis of erysipelas, if it be not in
reality a first stage of the latter.
ETIOLOGY.—An individual predisposition to cerebral congestion was

one of the unquestioned facts of the older medical writers. It
undoubtedly exists, and to-day we attribute it to inherited vascular
conditions either affecting the calibre and coats of the blood-vessels
or the vigor of the vaso-motor apparatus. I have remarked the
transmission of that weakness of the latter which underlies the
congestive phenomena of later life much more frequently in the
female than in the male sex.
It has been claimed that external refrigeration produces hyperæmia
of the brain, as of other internal organs, and that this accounts for
the greater frequency of the disorder in cold weather. Niemeyer
indeed speaks of persons who, suffering from this condition, appear
and act in such a way as to convince the laity that they are
intoxicated; and Andral, Falret, and Hammond note the occurrence
of a much larger number of cases in the winter than in the summer
months. I apprehend that the condition described by Niemeyer must
be extremely uncommon, both from individual experience and the
rarity of its mention as an independently observed fact. With regard
to the alleged greater frequency of the disorder in winter, it must be
remembered that all the three observers cited include in their
computation a number of cases in which congestion was a collateral
feature; they did not limit themselves to the disorder as spoken of
here. Certainly, the physician will see few if any persons who consult
him because of the hyperæmia-producing effects of a cold day.
The suppression of habitual discharges, of the hemorrhoidal flux,

and the cessation of menstruation are associated in many instances
with the more formidable grades of cerebral hyperæmia. Many
phenomena of so-called climacteric insanity depend on congestive
states. The sudden closure of an old ulcer or the removal of
hemorrhoids in advanced life has in some well-established instances
provoked alarming seizures not unlike those noted with paretic
dementia. The chain of proof establishing the direct influence of
physiological and pathological discharges on the vascular controlling
apparatus of the brain is most complete. Not alone cumulative
clinical observation, but the occasional happy result of therapeutical
procedure based on this supposed interdependence, support it.
Thus, the congestive cerebral state is recovered from when the
menstrual or hemorrhoidal flow is re-established, or an issue is
formed in the nape of the neck, or an old ulcer is allowed to reopen.6
6 The treatment of paretic dementia, particularly of the congestive type, is also based
on this relation. The irritating antimonial ointment and issues in the nape of the neck,
etc. have been lauded by older observers, and in two of my own cases had the best
results—in one, indeed, with established restitutio ad integrum of now nearly two
years' duration. I am inclined to suppose that its abandonment is due to an improper
selection of cases; in the ordinary premature senility and syphilitic types such
treatment is altogether ineffective. It is applicable to but a minority of cases at best,
and to them only at an early period. It is probably to a similar form of congestion that
Bouchut refers when (“Les Nèvroses congestives de l'Encéphale,” Gazette des
Hôpitaux, 1869) he speaks of a cerebral hyperæmia developing under the mask of a
meningitis—an expression that may be allowed if understood in the same sense as
the comparison between hydrocephaloid and hydrocephalus.
The origin of most cases that are brought to the physician's attention
is more or less complicated. A business-man, lawyer, or student
suffering from worry incident to his profession, living so irregularly as
to provoke gastric disturbances, becomes afflicted with insomnia,
and in addition is also constipated. Straining at stool, he finds a dull,
heavy sensation affecting the upper part of his head; attempting to
resume his work, this is aggravated, and after a series of temporary
remissions the condition to be later described becomes continuous.
In such a case the insomnia, usually due to neural irritability, if not
aggravated by an existing dyspepsia, leads to such a one, and a
circulus vitiosus familiar to all physicians is established. Each of the
factors concerned involves strain of the cerebral vaso-motor
apparatus, but none more so than the insomnia. It is not so much the
intensity of the strain as its long duration and the exhaustion of the
centre which in sleep is supposed to be at comparative rest. This
rest is not obtained, and, in conformity to the laws of neural
exhaustion, that centre becomes morbidly irritable. Now, gastric
irritation is competent to produce a reflex influence on even the
healthy cerebral organ; to do so it must be a severe one; but with the
class of persons alluded to the slightest indiscretion in food or drink
is sufficient to set up reflex vertigo or headache. The current theory
regarding these symptoms is that they are due to stimulation of the
vaso-constrictors and ensuing cerebral anæmia; but the subjects
before us will usually be found to flush up instead of becoming pale,
as in simple vertigo a stomacho læso, or if there be initial paleness,
there is a secondary flush, as if the tired arterial muscle had become
exhausted by the effort at obeying the reflex stimulus. In addition, a
profuse perspiration sometimes breaks out on the upper part of the
body.
The influence of traumatic causes and insolation in producing a

tendency to repeated and severe cerebral congestion is recognized,
particularly among alienists. It is supposed that an abnormal
irritability of the vaso-motor apparatus is provoked by these causes.
Abundant evidences are sometimes found in the brains of such
persons of an altered state of nutrition of the brain and its
membranes, and which point in the direction of congestion.
In the conditions thus far alluded to it can be fairly assumed that the
determination of blood to the cerebral blood-vessels is more or less
active. Passive congestion due to impeded return circulation is of
secondary interest, as the primary disease, be it a pertussis or a
laryngeal, cardiac, pulmonary, or surgical condition, will constitute
the main object of recognition and management. Certain quasi-
physiological acts, as coughing, hurried breathing, holding the breath
while straining at stool, and placing the head in a dependent position
while acting in the direction of passive hyperæmia, are to be
considered in connection with the active forms of congestion which
they may momentarily aggravate.
MORBID ANATOMY.—Owing to the non-fatality of the commoner forms

of cerebral hyperæmia, no pathological observations of them are at
our disposal, nor can we assume from analogy that the appearances
would be well marked if they could be made. What little knowledge
we have is derived from a study of more serious conditions of which
cerebral hyperæmia is an initial, collateral, or episodial feature.
In pronounced cerebral hyperæmia the entire brain is, as it were,

tumefied, so that the dura appears tensely stretched over its surface
and the gyri are flattened; both the meningeal vessels proper and
those of the pia are injected. According as the hyperæmia is active
or passive the color of this injection varies, being of a brighter red in
the former, of a purple or bluish color in the latter case. The purest
instances of active cerebral hyperæmia which I have seen were
found in patients dying in the apoplectiform phases of paretic
dementia (progressive paralysis of the insane). Here the cortex on
section exhibited a beautiful rosy tint, which was distributed in darker
and lighter strata in correspondence with the distributional areas of
the short and the long cortical arteries; there were numerous puncta
vasculosa both in the cortex and in the white substance, and in some
instances the arachnoid or the ventricular fluid was tinged with blood,
albeit no vascular rupture could be discovered. The red blood-
corpuscles undoubtedly escape by diapedesis from the surface as
well as the endymal vessels; the same thing occurs in the
intracerebral blood-vessels, whose adventitial spaces are often
crowded with accumulations of red blood-discs, while groups or
single ones are found scattered in the surrounding parenchyma, and
even in the periganglionic spaces. Occasionally accumulations of
pigment found near the vascular channels remain to attest the
former existence of other hyperæmias, and indeed slight
accumulations of this kind are found in the brains of most persons
who have reached adult life. These are to be regarded as remnants
of the physiological hyperæmias to which all active individuals are
subject. It is only when the accumulations become considerable and
numerous, as in the chronic insane, or are associated with those
changes in the blood-vessels which are discussed in the articles on
thrombotic and hemorrhagic cerebral disease, that they can be
regarded as indications of a pathological condition.
Acute simple meningitis is ushered in by cerebral hyperæmia of the

active form. This is not alone demonstrated by the early symptoms of
this disease, but also by the fact, which I have observed in two
cases, that where this form of meningitis originates on one side, as
from extension of the middle-ear trouble, the opposite cerebral
hemisphere exhibited intense congestion of the ideal type.
In that serious form of mental disease known variously as grave or

acute delirium and typhomania (Luther Bell) a form of cerebral
hyperæmia is observed which in its intensity approximates
inflammatory congestion. The surface of the brain appears marbled
and mottled; blood seems to exude from the gyri after the pia is
removed; the cortical lamination is invisible, owing to the hyperæmic
discoloration of the gray substance; and the parenchymatous
elements themselves appear to be in a state of cloudy swelling. In
one case I have observed transudation of a hyaline proteinaceous
substance and an exudation of fibrin around the larger arterioles. In
some cases of typhus fever a less intense but similar congestive
hyperæmia is found. The hyperæmias of paretic dementia, of acute
delirium, and of typhus fever agree in this one feature: that all
districts of the brain, from the cortex and white substance of the
cerebral hemispheres to the medulla oblongata, are involved nearly
to the same degree. In the hyperæmia of simple meningitis of the
convexity it is chiefly confined to the pia mater and the most
superficial cortical strata.
Congestion of the brain from stagnation of the venous return

circulation should not be confounded with active hyperæmia. With
this condition, which may be due to thrombosis of the sinuses,
morbid growths near the jugular foramen or in the neck around the
internal jugular veins, or, finally, to certain cardiac and pulmonary
disorders, there is rather a lesser than a greater amount of blood
sent to the brain; and it is not infrequently found that while the
surface of the brain appears congested, owing to the prominence of
the cerebral veins, the deeper parts are quite anæmic; and if the
injection be general, it will be found that the blood, whether in
arteries or veins, has the venous character. An excellent example of
this form of congestion is afforded by persons dying in the status
epilepticus. In their brains the venous channels stand out, filled to
their extreme capacity with blood almost black in color; and in
prepared sections, particularly such as are taken from the pons and
medulla oblongata, a beautiful natural injection of the vessels is
found. But that rosy color which is so characteristic of active
hyperæmia is absent, the tissues appearing purplish, bluish, or
chocolate-colored.
SYMPTOMATOLOGY.—There are few symptoms attributable to the

nervous system which have not been enumerated among the
characteristics or the occasional manifestations of cerebral
hyperæmia. Thus, Hammond not only follows Andral in enumerating
apoplectic, convulsive, comatose, and maniacal symptoms as acute
manifestations of active cerebral congestion, but assures us that
aphasia may occur under the same circumstances. In the course of
his work on the subject, “an absolute want of power to get correct
ideas of even simple matters,” confusion of ideas, weakening of the
judgment, vacillation of purpose, diminished logical power, illusions
and hallucinations of every sense, delusions, morbid apprehension
of impending evil, imperative, suicidal, and other impulses,
suspicion, hypochondriasis, furious delirium, and the use of profane
and obscene language, are enumerated among the characteristic or
prominent symptoms of various forms and cases of cerebral
hyperæmia.7 Not one but several of the recognized forms of insanity
have yielded a fair quota of their symptoms to this long array. Among
somatic signs he in like manner names neuralgic pains, numbness,
spasms, paralysis, false impotence, hyperæmia of the tympanum,
choked disc, abolition or perversion of the sense of smell, taste, and
sight, fibrillary or fascicular twitches, various states of the urinary
excretions, diplopia, and monoplegias. It is here equally evident that
the initial symptoms of a considerable number of organic and clearly
defined affections have been included. It is on account of the
confusion engendered by this wide interpretation of the meaning of
the term congestion of the brain that I have determined to limit the
term as previously indicated, and to consider only the active form
here.
7 A Treatise on the Diseases of the Nervous System, 7th ed., pp. 1-53. The natural
inference following a perusal of this chapter, as well as the monographs to which their
author refers, is that he has gathered together all states in which cerebral hyperæmia
was an associated factor, as well as those in which he appears to assume its
existence on theoretical grounds, and designated them as cerebral congestion. In
some instances he uses the terms hypochondria and cerebral hyperæmia
interchangeably (p. 50, loc. cit.).
A feeling of head-pressure, associated with a more or less severe

dull pain, aggravated by mental exertion, by stooping down, by
straining at stool, or when out of breath, and accompanied by a
subjective sense of mental dulness, is the most constant feature of
the ordinary cases. There is usually a vertiginous sensation, and an
irritability of the eye and ear not unlike that described in the article on
Cerebral Anæmia. Sleep is at first disturbed by vivid and sometimes
frightful dreams; later, it becomes interrupted, and ultimately
complete insomnia may develop. The action of the heart is
accelerated and exaggerated in some cases; in that event increased
pulsation of the carotids, flushing of the face, injection of the
conjunctiva, and a subjective sense of heat in the head and face are
experienced. Hammond, in accord with Hasse and Krishaber,
believes that febrile symptoms may develop under these
circumstances; most authorities, however, deny this for the
uncomplicated form. I have never found an objective rise of the
general temperature.
Such a condition as that described is usually slowly produced,

several weeks, or even months, being occupied in its development.
At first the unpleasant symptoms occur only at certain hours of the
day, with temporary exacerbations and remissions. It may be
arrested with comparative ease at any time; if neglected, the mental
faculties become affected, not in the grave sense in which Hammond
and the older authors describe it, so as to carry the patient into
actual dementia or delusional insanity, but rather in the way of
diminished working-power. It is more difficult to fix attention, to
recollect words, names, and figures, or to keep up a protracted
mental effort, than in health, but the formal judgment does not suffer.
I have known patients to be in this condition for many months, and
several for more than one year, without any grave deterioration. It is
true that in the prodromal periods of some forms of insanity, such as
acute mania, there is a condition very similar to that of these
patients; and this has led to regarding mania as a possible phase of
cerebral hyperæmia. But the very fact that, typically, mania is
preceded by such a stage—which is always of brief duration—that
maniacal excitement is a constant and unavoidable consequence
upon it, while, as far as known, the condition here described may last
for years without leading to a true psychosis, should prevent one
regarding the two conditions as identical, however similar they may
be for the time being.
In sufferers from cerebral hyperæmia who pass into the chronic state
of this disorder the disturbance of sleep and of the digestive organs
becomes very prominent, and continually reinforces the acting
causes of the disorder. In a large number of cases the head-
sensations become more or less localized; that is, while the general
feeling of pressure or dull ache may continue, a special area, which
can be covered by the palm of one hand, either in the middle part or
to one side—usually the left—of that part of the vertex, is the seat of
a more severe pain, complained of as a hot pressure. The patients
frequently claim that the temperature is higher at this spot, and,
contrary to what might be anticipated on a priori grounds, the
statement will be confirmed, not alone by the coarse method of using
the hand, but by the surface thermometer. The locality where this
occasional rise of temperature and the more common sense of
pressure are experienced corresponds to that part of the longitudinal
sinus where the largest cerebral veins enter. It is a noteworthy fact
that nearly all the important admunctories of this sinus empty into it
within the short space of two inches at this point.
Not all sufferers from cerebral hyperæmia give a history of a gradual

development of their symptoms. A few date their trouble from some
single intellectual, physical, or emotional strain. In one case,
complicated by marked evidences of cerebro-spinal exhaustion, the
patient, a lady, had during an illness of her husband, being deserted
by her servants, and the water-supply having been cut off, carried all
the water required for the invalid and domestic as well as sanitary
purposes up three flights of stairs for two unusually hot days in July.
In two others, strikingly similar in many details of their cases, both
being cornet-players, both attributing their illness to an extra call
upon their instrument, it was brought on in the older patient within a
few hours after playing on a hot day at the State Camp at Peekskill,
and in the second at Narragansett Pier as he left the sultry concert-
room and became exposed to a draught. In both these cases, as in a
large number since examined, some stomach trouble could be
positively determined to have antedated these symptoms. I mention
this because it is only in such cases that I have found the nausea or
vomiting which some writers regard as an occasional occurrence of,
and due to, the lighter form of cerebral hyperæmia.
There are no ophthalmoscopic evidences of cerebral hyperæmia of

this form. I have never found the optic disc presenting variations in
tint beyond those found within normal limits, except in a case of
saturnine encephalopathy with predominant signs of cerebral
congestion. I believe that the statement of Hammond8 as to the
existence of choked disc in cerebral hyperæmia is generally
regarded as due to the interpretation of organic diseases as
congestive states. It is not confirmed by authorities.
8 Loc. cit., p. 41, lines 29-36.
I have never found the tympanic membrane hyperæmic

independently of ear disease, even when tinnitus was marked. It is
claimed to exist by Hammond, and he adduces as analogous the
observation of Roosa that quinine produces an injection around the
handle of the malleus.9
9 It certainly is not necessary to look to the injection of the tympanum as an
explanation for the tinnitus of cerebral hyperæmia, based on such an analogy. The
tinnitus of cinchonism is more central in location, being producible in persons who
have pathological or no tympanic membranes, just as the tinnitus of cerebral
hyperæmia occurs indifferently under like circumstances.
The congestive states which follow traumatism and insolation are

properly considered in connection with the traumatic neuroses and
certain forms of insanity. But there are some milder cases in which
the symptoms remain within such compass as is comprised in this
section. The patient, after a fall or a blow on the head, suffers from
insomnia, has a sensation of fulness and ache in the head,
complains of a pulsating feeling in the occipital region and an
inability to concentrate his thoughts on subjects which previously
were parts of his routine. Under appropriate treatment recovery
ensues, but there remains behind an intolerance of alcoholic
beverages, and at times the patient experiences momentary fits of
abstraction, which may be regarded as mild analogies of the more
serious episodes of the full-blown traumatic neurosis. Thus, he may
be walking along the street and suddenly lose his train of thought for
an instant, to regain it on observing that he has inadvertently made a
misstep. Or in the midst of an address a previously fluent orator in
attempting to find a certain by-law in the rules of a society is unable
to recollect which he was in search of, and is compelled to take his
seat with a rambling apology. But for the fact that similar sequelæ
are noted in cerebral hyperæmia from other causes, it would be
questionable whether it be proper to attribute them to the congestive
element engendered by the traumatic influence. They are usually
noted when the hyperæmic phenomena proper have become latent
or disappear, and, with other symptoms customarily treated of as
mere results of circulatory trouble, may be regarded as signs of
neural exhaustion or inadequacy rather than of insufficient
ensanguination.
A more serious form of cerebral hyperæmia occurs in females in

conjunction with the climacteric period, and in both sexes in
consequences of the suppression of any habitual discharge in
advanced, and exceptionally in middle and juvenile, life. The advent
of the symptoms is rapid, a few hours or days sufficing for the
development of the attack. The face is flushed, the carotids throb
violently, the general cutaneous surface is congested, and the
patient is incoherently talkative. The one side, usually the right, is
heavy and tremulous, the fingers are devoid of their usual skill, and
the speech is more or less thick. The sleep is disturbed or replaced
by a stuporous condition, whose similitude to an apoplectiform
seizure is sometimes heightened by stertorous breathing. After one
or several days the patient emerges from this condition by degrees
or suddenly with complete restitutio ad integrum. But the attack may
recur, and ultimately it is noted in the event of repeated attacks that
the return to the normal state is slower and less complete: the
disorder then undergoes a transition into the congestive type of
paretic dementia described in another portion of this volume.
DIFFERENTIAL DIAGNOSIS.—In some of its clinical aspects cerebral

hyperæmia closely resembles cerebral anæmia. This is not
surprising when we bear in mind that both constitute nutritive
disturbances of the same organ, and that, notwithstanding the
apparent difference in the surface injection of an anæmic and a
hyperæmic brain, the state of affairs in the ultimate capillary districts
may be much more alike than might be anticipated on theoretical
grounds. In congestion we have wider vessels, and perhaps, though
not necessarily, a better quality of blood; but at the same time the
intracranial pressure may be such that the venous emunctories can
labor but slowly: the result will be that although there is more blood
in the brain, the lessened rate of flow places the nerve-elements
under nearly the same nutritive disadvantage that they are placed
under with the narrower and vitiated but more rapid blood-column of
ordinary anæmia.10 It is particularly the symptoms dependent on
those nerve-centres and tracts which are, so to speak, dynamically
sensitive, which resemble each other so much that an intrinsic
difference—both being placed side by side—is not always
determinable. This is true of the aural and optic symptoms. Tinnitus,
photophobia, scotomata, and blurring or darkening of the visual field
occur in both, and in about the same varieties. In my experience the
acuteness of hearing is more apt to be interfered with by the
subjective sounds with hyperæmic than with anæmic tinnitus. The
scotomata of hyperæmia are more distinct and coarser than those of
anæmia; darkening of the visual field is more apt to occur with
sudden rising in anæmia, while in hyperæmia it is provoked by
coughing, straining at stool, or other cause operating directly or
indirectly on the return circulation. It may be stated, as a general
rule, that if any of these symptoms are aggravated on lying down or
stooping, they are due to hyperæmia; while if the same procedures
are resorted to in anæmia, amelioration ensues. But in many chronic
cases these symptoms seem to continue as indications of a
permanently altered activity of the nerve-elements themselves; that
is, as a sort of pathological habit. In that case the position test may
not be decisive. In one respect there is a decided difference between
the anæmic and hyperæmic forms; there is never amaurosis in the
latter, while it is approached, and occasionally fully developed, in the
former. Much more importance attaches to the differentiation of
tinnitus due to nutritive brain disorders and that due to aural disease.
As a rule, the tinnitus from cerebral hyperæmia is symmetrical; if
unilateral, it is of short duration. The procedure of Valsalva11
aggravates the tinnitus of hyperæmia, and relieves that which is due
to the commoner forms of ear disease; the former is aggravated and
the latter relieved by noise.
10 It is also admitted that the blood stagnating in the larger veins and accumulating in
the arteries, the limits of compressibility of the other cerebral contents being passed,
the capillaries will suffer, so that with injected and turgescent arterioles and venules
there may be capillary anæmia.
11 I would caution against Politzer's method in cases of ear disease coexisting with
cerebral congestion. In a patient now under my treatment each session at the aurist's
was followed by a distinct exacerbation of the cerebral symptoms.
In the table on p. 773 I have attempted to formulate the principal

differential relations of the protracted forms of cerebral anæmia and
hyperæmia.
There are a number of so-called functional nervous states which,

aside from the fact that they are unwarrantably confounded with
cerebral congestion, do not require mention in a differential relation.
Such are the masturbatory neurosis, certain hysterical states, and
the asthenia resulting from nervous shock and overwork. These
states have found a provisional resting-place under the
comprehensive and non-committing title of neurasthenia or nervous
exhaustion—a term which includes conditions fully recognized by
Robert Whytt and Isenflamm in the last century.
Symptomatic State. In Cerebral Anæmia. In Cerebral Hyperæmia.

Pupils. Usually dilated and mobile. Usually small or medium.
Respiration. Often interrupted by sighing or Normal.
by a deep breath, even when at
rest.
Headache. Either sharp and agonizing, and If localized, accompanied by a
then in a limited area, or a subjective and objective
general dull ache, intensified in (always?) feeling of heat; if
the temples and over or behind general, is compared to a bursting
the eyes. or steady pressure.
Activity. There is lassitude. There is indisposition to exertion,
yet patient is restless.
Temperament. Lethargic, with exceptions. Choleric, with exceptions.
Intellect. Inability to exert. Rather confusion than inability of.
Sleep. Insomnia, interrupted by trance- Insomnia, with great restlessness,
like conditions, in which the variegated by unpleasant and
patient is comparatively confused dreams.
comfortable. Dreams often
pleasant.
Influence of upright Aggravates all the symptoms. Either without influence or
position of body. beneficial.
Influence of Amelioration. Aggravation.
recumbent position of
body and dependent
position of head.
Influence of acts If any, a sharp headache may Aggravated.
involving deep ensue, but the other symptoms
inspiration, such as are not aggravated.
blowing, straining at
stool, sneezing, etc.
TREATMENT.—Ergot of rye with its preparations may be regarded as

the cardinal drug in cerebral hyperæmia. There are few drugs in the
domain of neurological therapeutics which are so directly antithetical
to the pathological state as this one. There is scarcely a case of
cerebral hyperæmia that is brought to the physician's attention but
may be regarded as being in part due to an over-distension of the
cerebral vascular tubes. This is directly overcome by ergot, and the
quantity which such patients will sometimes bear without showing
signs of ergotism is something remarkable, in notable contrast with
the subjects of cerebral anæmia, who are usually very sensitive to it.
About three grains of Bonjean's ergotin may be regarded as a safe
trial-dose for an adult, and unless a distinct effect is produced within
two or three days this dose may be raised to six grains twice or three
times within twenty-four hours. It is not advisable to combine
strychnia with the ergotin, as is often done; the effect of that alkaloid
is to increase the psychical and sensorial irritability of the patient.
Chloral hydrate or bromide, or both in combination, is as useful an
adjuvant here as it would be hurtful in cerebral anæmia.
It is not usually necessary to employ special hypnotics in cerebral

congestion. The same drug whose beneficial effect is so potently
marked during the daytime that tinnitus, cerebral pressure, and
subjective drowsiness will disappear before it, if not as rapidly, more
enduringly, than the symptoms of cerebral anæmia disappear before
nitrate of amyl, will also overcome the insomnia in the majority of
cases. Where it fails, warm pediluvia or sitz-baths will prove more
efficient than the majority of hypnotics. Their use, at all events,
involves no hurtful effect on a—possible already—disordered
stomach, and their certainty of action is much more even. Their
temperature should be about 40-42° Centigrade, and the immersion
continue from fifteen to twenty-five minutes.12
12 A number of experiments, the most recent of which were by Musso and Bergesio
(Rivista sperimentale di Freniatria e di Medicina legale, 1885, xi. p. 124), have shown
that in such baths the cerebral pulsations become less excursive and that the volume
of the brain decreases. The same applies to general warm baths.
In those cases where the subject sensations accompanying

hyperæmia, active or passive, are intensified in the posterior
segment of the head or the nuchal region, leeches at the mastoid
process, or cupping, wet or dry according to the severity of the
symptoms, will often give immediate relief. Burning with the actual
cautery, or, what is equivalent and a much neater application, the
heated glass rod, has an equally happy effect in that class of cases
where throbbing and pain are intensified low down. It should be done
as near the spot indicated by the patient's complaints as possible.13
13 In a case of gliomatous hypertrophy of the pons oblongata transition marked by the
development of numerous tortuous and enlarged blood-vessels the episodes of the
disease were found to be of the congestive type, and yielded to no other treatment
than that with the cautery.
The diet of patients who are suffering from or subject to cerebral
hyperæmia should not be stimulating nor difficult of digestion. It is
much more important to avoid distension or overstrain of the
stomach than to reduce the nutritive value of the food in the majority
of cases, for true plethora is much less common than is supposed.
The bowels should be so regulated that the patient have at least
one, and that an easy, movement a day. The saline cathartics,
particularly the Carlsbad salt, are to be used to effect this if
necessary. The clothing around the neck should be free and not
compress the parts.
In those severe forms of cerebral congestion attending the

climacteric period, or occurring in consequence of the suppression of
discharges, and similar causes, the symptoms are often so alarming
as to render energetic measures, such as bleeding, immediately
necessary. This may be affected by applying leeches to the nose,
the temples, or by bleeding at the arm. If due to the suppression of
hemorrhoidal discharges or menstruation, the leeches should be
applied to the anus and hot sitz-baths taken. In the milder forms a pill
composed of aloes, podophyllin, and ox-gall, recommended by
Schroeder van der Kolk, will be found effective.
Cerebral Anæmia.
The oft-confirmed observation of Treviranus, that the brain is paler in

the sleeping than in the waking state, supplemented as it has been
by more elaborate observations, which show that the difference
between the intracranial blood-amounts, as estimated in these
opposite states, is equivalent to one-twenty-fourth part of the total
blood-amount of the body, has been made the basis of much
dazzling theory and premature speculation. Hyperæmia of the
central nervous apparatus or of certain of its provinces becomes
regarded as synonymous with over-activity, and anæmia, general or
provincial, as the expression of the opposite functional state.
Elaborate directions may be found, even in recent treatises on the

Infrastructure Investments Regulatory Treatment and Optimal Capital Allocation Under Solvency II 1st Edition Fabian Regele (Auth.)

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Infrastructure Investments Regulatory

Treatment and Optimal Capital

Effective Investments on Capital Markets 10th Capital

Capital Allocation and Value Creation A Market Based

A Critical Legal Study of the Ideology Behind Solvency

Cybersecurity Investments Decision Support Under

Weaponising Investments. Volume II. Jens Hillebrand

Raising Capital on ■uk■k Markets: Structural, Legal and

Infrastructure Investments in Developing Economies The

Endodontic Prognosis Clinical Guide for Optimal

More information about this series at http://www.springer.com/series/13198

Library of Congress Control Number: 2017959882

Printed on acid-free paper

This Springer Gabler imprint is published by Springer Nature

Infrastructure investments are frequently characterized as long-term investments generating

List of Figures .......................................................................................................................... IX

2 Overview of the infrastructure asset class .......................................................................... 5

3 Regulatory treatment of direct infrastructure assets ...................................................... 25

5 Discussion of the results ..................................................................................................... 69

List of References ................................................................................................................... 73

Figure 1: Modular approach of the SCR-determination........................................................... 28

Figure 6: Evolution of the portfolio´s solvency capital requirements ...................................... 65

Table 1: Infrastructure categorization using the sector approach............................................... 9

Table 9: Correlation matrix used for the stochastic processes ................................................. 50

AnlV Verordnung über die Anlage des Sicherungsvermögens von Pensions-

EEA European Economic Area

PPP Public Private Partnership

SCR Solvency Capital Requirement

VaR Value at Risk

Infrastructure investments are frequently characterized as long-term investments generating

© Springer Fachmedien Wiesbaden GmbH 2018

1.1 Research questions

1.2 Research approach

2.1 Current market situation for infrastructure investments

© Springer Fachmedien Wiesbaden GmbH 2018

Economic infrastructure Social infrastructure

Transport Utilities Communication Health Education Security

- Ground: - Energy, Water, - Cable - Hos- - Schools, - Prisons,

The second approach separates infrastructure investments according to their maturity

Table 2: Infrastructure categorization using the investment vehicle approach (Part I)

Capital Vehicle Listed Asset Unlisted Asset

Stocks: Unlisted equities / PPPs:

Indirect x Know-how requirement: x Know-how requirement:

Capital Vehicle Listed Asset Unlisted Asset

Corporate Bonds: Project Loans / Project Bonds:

Bond funds / Loan funds:

2.2 The risk-return profile of direct infrastructure assets

Phase Type of risk Source of risk Impact

Land use, ground condition This risk can reach a high

Phase Type of risk Source of risk Impact

See above. These risks can lead to

ANÆMIA AND HYPERÆMIA OF THE BRAIN AND

One great difficulty in determining the precise nature of the disorders

3 Virchow's Archiv, lxiv.

4 The observations of Gärntner (Medicinische Jahrbucher, 1884, 1) harmonize with

ETIOLOGY.—An individual predisposition to cerebral congestion was

The suppression of habitual discharges, of the hemorrhoidal flux,

The influence of traumatic causes and insolation in producing a

MORBID ANATOMY.—Owing to the non-fatality of the commoner forms

In pronounced cerebral hyperæmia the entire brain is, as it were,

Acute simple meningitis is ushered in by cerebral hyperæmia of the

In that serious form of mental disease known variously as grave or

Congestion of the brain from stagnation of the venous return