Many institutional investors are considering an investment in infrastructure or have already taken the plunge, and as they become more sophisticated about investing in this asset class, one of the questions they consider is: what is an appropriate fund structure? To answer this question, investors look at the relationship between the manager incentives of the investment vehicle, the level of risk and return sought by the investor, and the alignment of interest between the fund and the investor.

Most of the infrastructure funds currently being marketed to institutional investors are based on the private equity model. Fund sponsors use this model because they believe investors are familiar and comfortable with it and because this model avoids the difficult question of how to value assets in the absence of a sale. But the one size fits all approach may not be right.

Some investors view infrastructure as a subset of private equity. They seek an investment with a high level