America faces two public finance challenges that – if left unaddressed – will have serious implications for the fiscal stability of state and local governments and for the quality of life of all Americans. The funded status of public pension plans and the state of the country’s critical infrastructure are generally viewed as distinct subjects. This book argues otherwise. Over the long term, when one of them deteriorates, the other is sure to follow. Moreover, infrastructure investments are well suited to the portfolio needs of public pension plans, which themselves comprise the single largest pool of capital potentially available for the financing needs of American infrastructure and today are under-allocated to this asset type. This book begins with an analysis of the $4.3 trillion U.S. public pension system, drawing on a primary dataset comprising thousands of observations drawn from a decade of annual reports of the 25 largest American public pension systems – which together comprise about 55% of all public pension assets in the country. It then links sustainable pension finance to investments in real assets, specifically infrastructure projects. "Bridging the Gaps" is intended to provide greater transparency to the complex public finance challenges that mark these issues. Those with an interest in the public pension system will learn much from the discussion of these complex organizations - so critical to sustainability of retirement benefits. Asset managers and other advisors, who sell to these investors, will benefit from an empathic approach to understanding the needs of their most important clients. The book concludes with a range of ideas that can be explored by responsible public officials and policymakers as well as infrastructure agencies and their advisors. The ultimate objective is to help in the search for solutions to the persistent gaps facing America’s public pension system and at the same time unlocking capital to reduce America’s persistent infrastructure problems - creating winners on both ends of the financial chain. Keith Ambachtsheer, Director Emeritus, International Centre for Pension Management, Rotman School of Management, University of Toronto "This book is unique in the sense that it connects two important topics. First, it offers a clear exposition of the fiscal challenges facing many U.S. public sector pension plans. Second, it offers an equally clear exposition of why infrastructure investments are an exceptionally good match for the liabilities of these plans. It also examines the Canadian experience where public pension plans have materially higher infrastructure investment exposure and are in materially better fiscal shape." John Biggs, Former Chairman and CEO, TIAA-CREF "Lipshitz and Walter have created a new and sobering analysis of the investment characteristics of the troubled major public sector pension funds. Their selected discussion of their few investments in infrastructure is an important, practical stimulus for their managers to see infrastructure as a new and profitable area of diversification." Jameson W. Doig, Research Professor in Government, Dartmouth College "A first-rate analysis of the strengths and weaknesses of investment strategies used in the field of public pensions, coupled with a persuasive argument that pension funds should invest more of their assets in highways, airports and other infrastructure facilities for the benefit of both pension funds and a society that has devoted far too little funding to meeting infrastructure needs." Rick Geddes, Professor and Director of the Cornell Program in Infrastructure Policy "Clive Lipshitz and Ingo Walter have produced a timely and comprehensive book on perhaps the most exciting area of finance today: pension fund investment in infrastructure. Their lucid analysis and policy suggestions are a win-win-win for millions of people: more money will flow into infrastructure and pension-fund investors will reap better returns, all while mitigating the endemic problem of deferred maintenance. This book is a must read for anyone following cutting-edge thinking about this critical emerging asset class." Scott E. Kalb, Chairman, Sovereign Investor Institute; former CIO and Deputy CEO, Korea Investment Corporation "A must read for anyone interested in the next chapters of pension fund management and infrastructure finance in the U.S. This clearheaded, readable book focuses on major challenges facing our pension funds today, including inadequate funding and irrational discount rates. In addition, the authors set forth credible reasons why pension funds should increase allocations to infrastructure, not only to improve long-term risk adjusted returns but also to contribute to broader social and economic goals of savers. 'Bridging the Gaps' makes a compelling case how to solve our pension fund crisis and shore-up our crumbling infrastructure in one go." Mark Weisdorf, Founding CIO and CEO, JP Mo