In an op-ed published in the Financial Times on 8 April, 2024, Frédéric Blanc-Brude, chief executive of Scientific Infra & Private Assets, says that it is time for investors in private companies like Thames Water to take a more scientific view of asset pricing. Indeed, a key reason why the risks of investing in Thames Water were ignored, which led to considerable losses by a group of large international pension plans, is the continued use of invalid asset pricing approaches for reporting the “fair value”. In reality, the “capital asset pricing model” (CAPM) relies on a very abstract notion of “market portfolio” and does not fit the market data. Instead, investors in private companies need proper measures of risk for the private asset classes to which they now allocate large amounts, and of the value of the assets they hold.

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