Infrastructure is sold as an inflation hedge. The pitch is intuitive: toll roads, utilities, and other essential assets often have revenues explicitly linked to consumer prices. When inflation rises, so do tariffs. The asset should therefore preserve real purchasing power for investors, offering protection that bonds and equities cannot.

Toll roads are frequently cited as the clearest example. Unlike regulated utilities, which face periodic resets and regulatory lag, toll concessions typically feature contractual escalation clauses that adjust prices mechanically with CPI. No negotiation, no delay, no discretion. If inflation rises 5%, tolls rise 5%.

But if toll roads are such effective inflation hedges, why did real equity returns behave unexpectedly during the 2021-2023 inflation surge? And why do practitioners often speak of inflation protection while academic studies find mixed evidence?

The answer lies in a critical distinction: CPI-linkage protects nominal revenue. It does not automatically protect real equity returns. The gap between the two is where investors lose money without realising it.

An analysis by Tim Whittaker, Director of EDHEC Infra & Private Assets (EIPA), published on Marks & Markets on 8 February, 2026, uses the Eastern Distributor, a Sydney toll road with transparent CPI-linked pricing, to trace exactly where the inflation hedge breaks down. The findings suggest that contractual toll escalation, while valuable, is only the first step in a longer chain. By the time inflation flows through traffic responses, operating cost drift, and capital maintenance exposure, the investor may receive only partial protection.