Pension funds are looKing for investments that will perform even when the stock market is doing badly. They also want long-lived assets to match the payments they must make in years to come. Inflation-protected government bonds, especially those with long durations, fit the bill. The trouble is that yields on such bonds have declined dramatically in recent years.

Infrastructure provides the perfect alternative, say those who manage specialized funds investing in toll roads, airports, utilities and other vital services. Not only is infrastructure an inherently safer investment than equities, the returns are significantly higher than those available on government bonds.

This message has not fallen on deaf ears. It has spurred tremendous investment flows into this area in recent years. However, the valuations for infrastructure assets have become so stretched, and the amount of debt employed so large, that investors are now exposed to a wide variety of risks.

Infrastructure...