Private equity funds are also now able to move away from taking pure equity risk and can achieve some downside protection by structuring their investments.
For example, listed infrastructure benchmarks that track stocks of infrastructure companies may exhibit greater equity risk than that of direct infrastructure investments.
In this instance, however, the risk premium is derived by multiplying the equity risk premium times beta, which is a measure of stock price volatility.
Note that the classic pension portfolio, structured from the 60/40 equity/bond construct, has 90% of its total portfolio variance driven by equity risk.
