A boutique fund manager is moving to capitalise on a “massive opportunity” from the boom in data consumption.
Gravis Advisory is the investment adviser behind the new, open-ended VT Gravis Digital Infrastructure Income Fund, one of the first vehicles in the UK to invest in listed companies owning assets including data centres, e-commerce fulfilment centres, urban logistics warehouses and telecom towers.
“We are in the fourth industrial revolution – it’s changing the way we live, work and play,” said Matthew Norris, director of real estate securities at Gravis and the fund’s manager.
The open-ended fund invests in equity and bonds from REITs and real estate operating companies. These include SEGRO, US-based Prologis REIT and Singapore-listed data centre firm Keppel DC. It is targeting an annual dividend yield of around 3%.
Investors in the find have so far committed £15m, but Norris said the vehicle could grow larger than Gravis’s £772m UK infrastructure vehicle given the “rapidly growing” scale of the opportunity, not least in data centres. That sector is one of the fund’s “strongest conviction calls”, Norris said, citing estimates that data volumes are set to grow by 30% per annum over the next four years.
According to Norris, the number of digital infrastructure companies with a market capitalisation of at least £250m and a minimum average daily turnover of £250,000 has increased to more than 60 over the past decade. Alongside this increase, their aggregate market cap is up roughly sixfold to £450bn, he added.
“When you’ve got a market trading £2bn a day, this fund could be hundreds and hundreds of millions of pounds,” Norris said. “There are massive opportunities… This is global and it’s digital. It could be as large as our UK Infrastructure Income Fund – it could be larger. There is a much larger opportunity set.”
Major investors spotting opportunities in digital infrastructure REITs include Blackstone’s real estate and infrastructure arms, which last week agreed an all-cash $10bn deal to take over listed US data centre operator QTS Realty Trust, a business that Gravis’s digital infrastructure fund has invested in.
In the UK, Cordiant Digital Infrastructure last week closed a £185m equity raise through a share placing. Although the company struggled to reach the £250m target raise set out last month, the trust raised £370m in its initial public offering on the London Stock Exchange in February, smashing its £300m target. The proceeds will be used to buy data centres, mobile towers and fibre optic networks in Europe and the US.
Another trust, Digital 9 Infrastructure, was launched by Triple Point in March, raising £300m.
Norris said that investors clearly understand the opportunities that logistics has to offer, but that broader appreciation for other areas of the digitalisation “mega-trend” are still to come.
“There’s still a fair way to go,” he said, noting that, as an asset class, digital infrastructure is “still young and going to go through massive growth”.
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