Designed to invest in companies which own the physical infrastructure assets vital to the digital economy, the VT Gravis Digital Infrastructure Income Fund marked its third anniversary on 31 May 2024.

The fund has returned 0.35% since launch, making it the 7^th best performing fund in the 50+-strong Investment Association Property Other sector*. Over the three years, the fund has also produced a reliable and growing income: the current trailing 12-month dividend yield is 3.0% and has grown 20.5% since June 2022**.

Here, investment adviser to the fund, Matthew Norris, gives five reasons why he believes digital infrastructure is the future of property investing.

“Unlike traditional property areas such as offices and retail, demand for digital infrastructure such as data centres, network cabling and communications towers is outstripping supply. And this is set to continue - in the next five years, consumers and businesses will generate twice as much data as all the data created over the past 10 years***. Average global mobile data consumption per smartphone alone is expected to reach 56 GB per month at the end of 2029****.”

“With demand outstripping supply, landlords of digital infrastructure assets - which tend to be REITs or real estate companies - are able to secure reliable leases for the long term. Many of these leases include contractual rent escalators, lending a degree of dependability and predictability to the future income streams, as well as inflation protection. Additionally, these assets benefit from high tenant retention rates.”

“Digital infrastructure is new infrastructure – the assets are young and purpose-built by experts who understand exactly what is required both today and in the future. This means a key risk when considering traditional real estate - obsolescence risk - is avoided. By investing in digital infrastructure investors don’t end up with a portfolio of assets which could be become stranded or require huge amounts of capex to repurpose – all the while not receiving any rent.”

“Another key consideration for investors is political and regulatory risk - and never more so arguably than this year. 2024 is one of the biggest election years in history, with around half of the world’s population going to the polls in more than 40 different countries*****. However, regardless of political orientation, our view is that governments and regulators around the globe recognise the critical nature of digital infrastructure assets in securing their own future prosperity and are unlikely to intervene.”

“We’ve seen large institutions, particularly private equity heavyweights, repositioning their real estate portfolios away from traditional real estate and into digital infrastructure via the large portfolios of assets held by REITs. This has acted as an insurance on the downside, whilst offering some sweetness on the upside. Since launch three years ago, no fewer than eight companies held in the Fund have been taken over by private equity buyers seeking future rent reversion and making the most of the discounts on offer in the listed markets. I expect this to continue.”

Find out more about the VT Gravis Digital Infrastructure Income Fund here.

*Source: FE fundinfo, total returns in GBP, 31 May 2021 to 31 May 2024

** C Income share class. Trailing 12-month dividends 28 March 2024 compared to 30 June 2022.

***Source: IDC #US49346223, Revelations in the Global Storage Sphere 2023, John Rydnin, Aug 2023, jll-data-center-outlook-global-2024.pdf

****Source: Ericsson Mobility Report November 2023

*****Source: More than 4 billion people are eligible to vote in an election in 2024. Is this democracy’s biggest test? (theconversation.com)

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Past performance is no guarantee of future performance.

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