Another technique used to evaluate asset valuation is backtesting, for example checking if last year's projected cashflow came about, and if not, then understanding why the valuer got it wrong.
He says: "These assets are more challenging to value because there isn't an active trade price. But there's a very well defined set of standards and procedures that most of the industry will use, such as the discounted cashflow model.
"With private asset valuations, there is often reference to the public markets to determine the reasonability of the fair value. But there's going to be some judgements in these models."
The issue of risk
Another issue is risk, especially with large scale infrastructure projects, as the development of HS2 has shown - although this is being built with taxpayer money, rather than pension funds.
Simon Edwards, head of private markets and property at the West Yorkshire Pension Fund, says that along with other large local authority pension funds, they invest both through a fund and direct via GLIL, a £4bn fund for investing directly into mainly UK infrastructure.
He says: "The infrastructure investment into global funds is typically via a general/limited partner structure where we commit capital at the outset and it's drawn down over three to five years, and the managers of those funds deliver what they set out to do.
"In the fullness of time those assets are realised and proceeds are redistributed back. An infrastructure fund life can be seven years to 25 years."
GLIL was founded in 2015 by local authority pension schemes, to invest directly at lower cost in UK infrastructure, and more recently joined by Nest, the £43bn master trust set up by the government 16 years ago.
Edwards says: "We start with the investment structure and what we need to achieve and the expected returns in private markets. For core [that is essential], lower risk infrastructure, we would be looking for 3 or 4 per cent above inflation; for core plus, low double digit returns.
"You may be taking higher risk in fibre, where there is a risk in overbuild and construction exposure, but it's trying to balance risk and return. If you get the contracted, inflation-linked revenue income stream over a long period of time, that meets your returns requirements then this may be considered lower risk.
He adds that they invest heavily in UK assets, such as onshore and offshore wind, the M6 toll road and Forth Ports, through GLIL. The fund typically sees annual returns of 7 to 10 per cent, depending on asset and risk profile.
While HM Treasury and DWP mull the responses to the call for evidence, and how far they should go in directing pension funds to UK assets, those in the pension world are hoping that any transition will work for both savers and private market investment professionals.
