Wealth DFM Magazine recently hosted an insightful and timely webinar chaired by Sue Whitbread and Jenny Hunter, from Wealth DFM Magazine, with their expert guest Matt Norris, Director of Real Estate Securities at Gravis Advisory Ltd. The session delved into insights on the global economic outlook, the evolution of digital infrastructure investments, and the strategic vision of leaders like the VT Gravis Digital Infrastructure Income Fund.
Amidst rapid technological advances and economic shifts, digital infrastructure emerges as a beacon of opportunity for investors. This burgeoning asset class goes beyond traditional property investments and promises significant growth potential in a digitally transformed world. So here are the webinar highlights, but to dive into the details you’ll have to tune into the recording.
Big picture thinking
For those who aren’t completely up to speed on digital infrastructure investing, there are four key types: communication towers, data centres, fibre optic networks, and logistics assets. These investments offer reliable, contractual income with high cash flow predictability, making them attractive for investors seeking stable returns.
There is a clear distinction between traditional and digital property investments. Digital infrastructure arguably represents the next generation of property, driven by the demands of investors. Unlike traditional office and retail properties, digital infrastructure assets cater to modern technological needs, ensuring long-term demand and stability.
After laying out those basics for us, Matt started things off by emphasising the positive global economic outlook, noting continued economic growth, decreasing inflation, and falling interest rates as favourable conditions for investors in infrastructure and property.
He discussed the apparent disconnect between the positive economic environment and the market’s perception of digital infrastructure assets. Despite legacy headwinds from rising rates, the sector appears poised for growth due to declining rates and strong megatrends in digital infrastructure.
Highlighting what he is calling the ‘Fourth Industrial Revolution’, Matt explained how digital infrastructure, including data centres and communication networks, are essential for modern work and leisure activities. He noted in particular the growing reliance on digital infrastructure due to increased remote work, online entertainment, and e-commerce, all of which require robust digital networks and facilities.
Digital sector dive
So, could digital infrastructure be considered a niche investment? That’s one of the questions put to Matt, diving into the details of the sector. Matt confidently responded that it is a growth sector and emphasised that focusing on a growing subsector is advantageous, especially when it offers significant opportunities. Digital infrastructure is expanding rapidly, making it a compelling investment choice. Addressing concerns about diversification and liquidity, Matt explained that it is possible to build a globally diversified portfolio within the digital infrastructure space. Also, unlike traditional property funds that face gating and suspensions, digital infrastructure funds investing in transferable securities, don’t face the same blockages.
The Gravis approach
Matt went on to tell us about the VT Gravis Digital Infrastructure Income Fund and strategy, investing in best-in-class owners and operators of digital infrastructure assets. The fund offers a yield of 3-4%, with growth and upside potential, making it an attractive option for investors seeking reliable income and capital growth.
He emphasised the significant expansion potential within these sectors. Gravis’s Digital Infrastructure Income Fund, celebrating its third anniversary, is currently valued at £28 million and has shown impressive performance.
Gravis’s investment team continuously seeks new opportunities within the Fourth Industrial Revolution. They focus on identifying high-growth sectors and maintaining low turnover to allocate more time to research and hunt for new ideas.
Looking ahead, Matt envisions substantial developments in digital infrastructure over the next decade. Data centres are expected to grow in size and specialisation, with strategic locations remaining key. Towers, essential for 5G networks, will see increased demand, while logistics centres will benefit from enhanced automation and AI integration, making tenants more invested in their facilities.
Speaker summary
Matt’s enthusiasm for the sector’s future really shone through during the webinar and his overriding outlook is that investment opportunities will continue to flourish. Speaking before the latest Bank of England Monetrary Policy meeting, he said: “The key macroeconomic takeaway is that good news is starting to filter through regarding the global economy. Inflation is retreating and is now much closer to central bank targets than it has been for some time. The knock-on effect is that a number have started to cut interest rates. Canada, Switzerland, Sweden and the European Central Bank, have all reduced rates. Both the UK and US are expected to follow suit later in the year.
In terms of the market environment, there is a clear disconnect and, with it, an opportunity to take advantage of valuations on offer from companies associated with the Fourth Industrial Revolution: data centres, communication towers, logistics assets and networks.
Given the sheer amount of M&A activity this year, it is clear that private equity sees the opportunity. Data proliferation is one of the sector’s highest conviction areas and private equity firms have been hoovering up public equities.
The Fourth Industrial Revolution brings with it massive growth potential from multi-year megatrends. Over the past three years since the VT Gravis Digital Infrastructure Income Fund was launched, we have witnessed a proof of concept of the focus on quality companies benefitting from this evolution. And there is a great runway of investment opportunities in front of us.
The Fund itself can sit alongside other funds in many types of investment portfolios. It is different to a traditional global real estate or infrastructure fund as it invests in the next generation of assets with stronger growth dynamics. It adds income, growth and upside potential.”
What now?
This webinar underscored the immense potential of digital infrastructure investments, driven by the ongoing digital transformation and the Fourth Industrial Revolution. For investors, this sector offers promising opportunities for reliable and growth-oriented returns.
Digital infrastructure is clearly not a niche investment but a growing sector with significant diversification and liquidity benefits. Investors can easily access this space through listed markets and specialised funds like those offered by Gravis.
Even more easily you can access the full webinar recording here and listen to Matt’s expertise and passion about a sector we should all be looking to learn more about
Click here to learn more about Gravis
About Matthew Norris
Matthew is responsible for the oversight of the VT Gravis UK Listed Property Fund and the VT Gravis Digital Infrastructure Income Fund.
Matthew has more than two decades investment management experience and has a specialist focus on real estate securities. He served as an Executive Director of Grosvenor Europe where he was responsible for global real estate securities strategies. He joined Grosvenor following roles managing equity funds at Fulcrum Asset Management and Buttonwood Capital Partners. He also provides expert input to research projects run by EPRA, which focus on the importance of emergent real estate sectors.
Matthew graduated with a degree in Economics & Politics from the University of York. He is a CFA charterholder and holds the Investment Management Certificate.
