The strategy of the Fund is to invest in a globally diversified portfolio of best-in-class, next generation real estate and infrastructure companies that are listed in developed markets. These companies are likely to benefit from the digitalisation of economies, changing the way we work, live and play.

The Fund currently invests in 32 listed infrastructure companies operating at the intersection of real estate and technology. These companies own physical infrastructure assets that are vital to the functioning of the digital economy and are active in four specialist sub-sectors: logistics warehouses supporting e-commerce (50.4% portfolio weight), data centres (26.1% portfolio weight), mobile communication towers (19.0% portfolio weight), and networks (3.7% portfolio weight).

Over the course of the month, the Fund performed positively, with NAV increasing by 2.8% (C Acc GBP). Since launch, NAV has increased by 3.2% (C Acc GBP). In comparison, the global real estate index has increased by 9.0%*. During January, the logistics and cell towers subsectors delivered positive returns, returning 3.2%** and 0.1%**, respectively. The networks and data centres sectors delivered negative returns, falling 0.2%** and 1.0%**, respectively.

The Federal Reserve decided to hold interest rates in January, based on a stronger US economy. The Chairman of the Federal Reserve, Jay Powell, said the strength of the economy meant the central bank was not “in a hurry” to cut borrowing costs. Despite this, U.S. consumer confidence weakened for a second straight month in January amid renewed concerns about the labour market and inflation, with the consumer confidence index falling to 104.1 in January from 109.5 in December.

Meanwhile, in the data centres sector, DeepSeek AI released a new model that is expected to be more cost-efficient than models designed by companies like OpenAI. While this led to a drop in share price for data centre assets in January, we think a reduction in the cost of AI tools is likely to lead to the increased adoption of AI tools, causing higher demand for digital infrastructure assets like data centres. In addition, it is likely the most energy efficient data centres will be able to command higher rents in the future. This may benefit established portfolio holdings like Digital Realty (portfolio weight 5.7%) and Equinix (portfolio weight 7.6%).

During January, the logistics subsector delivered the best performance, primarily on the back of positive full year results from a number of holdings. Within this sector, Prologis, (portfolio weight 7.7%), a REIT that invests in logistics facilities, released positive Q4 results, with healthy cash leasing spreads of 40%. They also announced an increase in leasing volume, which was up 6.5% year-on-year, and 78.4% retention for Q4, which was an improvement on Q3’s retention of 75.7%. Prologis saw positive share price performance during the month, returning 12.4%. Tritax BigBox (portfolio weight 7.3%), a REIT that invests in distribution centres, announced it is developing a new data centre in the UK. It also released a trading update for 2024, which included a £22.7 million increase in contracted rents. This was more than the £15.4 million increase reported in 2023, and occurred via acquisitions, development lettings, rent reviews and asset management. Tritax BigBox also announced increased rent reversion of 26.1%, which was up from 23.0% in 2023. Colin Godfrey, CEO of Tritax BigBox, said of the announcement, “We enter 2025 with growing confidence, driven by improving occupational market conditions, our expanded range of growth drivers - which now include highly accretive data centre developments - and enabled by ongoing investment in our high-calibre team, dedicated to achieving continued success for Tritax BigBox."

Also in the logistics subsector, Warehouses de Pauw (portfolio weight 2.2%), released their full year results for 2024. This included EPRA EPS of €1.50, which was up 7.4% year-on-year. They also announced a 2.6% increase in rental income, as well as rent reviews on c.6.2% of the portfolio, which achieved an average uplift of 12.0%. In addition, the reversionary potential of the total portfolio is c.11%.

The fund manager continues to hold a positive outlook on the digital infrastructure sector, primarily due to increased rent reversion across the portfolio and increased demand for digital infrastructure assets. There is no doubt that next generation listed digital infrastructure remains a core component of the technological revolution, particularly as AI models become increasingly efficient and demand for their services increases. This is highlighted by the strong performance seen across the underlying assets in the portfolio, and as such, the digital infrastructure sector remains a key investment area for any investors seeking long-term returns.

*MSCI World IMI Core Real Estate IMI GBP
**Defined as the calendar month, as opposed to the valuation month