As fears of inflation increase, we are starting to see managers of property and infrastructure assets talking about the fact that their favourite asset class is a wonderful inflation hedge because the majority of their income streams come with automatic inflation adjustments. In other words, if we are worried about inflation, invest in my product.

Like all the best Crockpots, there is more than a grain of truth here, but it is only half of the story. As we all know, most of these real assets are valued using some form of discounted cash flow model which is of...