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Private Fund Trends in Focus: Digital Infrastructure

by Andrés Ramos, Content Marketing Specialist – Nasdaq Private Fund Solutions

In addition to providing granular information on investor and consultants’ asset allocations and recent commitments, Nasdaq’s eVestment also collates and makes available the latest presentations by fund managers to their investors, and consultant research on strategies across the private markets. For users, this can be a powerful early indicator on some of the new investment themes gaining attention by allocators and their peers. 

As part of a mid-year review of commitment activity and trends captured by Nasdaq eVestment platform, our review of various documents collected from investors has highlighted the burgeoning interest, and capital raising, of digital infrastructure funds.  

The new kid on the Real Assets block

Digital infrastructure is quickly becoming one of the most sought-after strategies within real assets for public pension plans. Digital infrastructure funds invest in the critical assets that help power and support our increasingly data-driven and Internet-connected world. Funds invest in assets such as cell towers, fiber optics lines & network, and data centers.

As interest from institutional investors in fossil fuel and energy investing slowly fades due to lagging returns and an increased focus on ESG, digital infrastructure is taking its place in the real assets portfolios of these LPs.

Demand for data and faster internet connectivity is indisputable and digital infrastructure fund managers are positioning themselves to capitalize on the demand. In a recent digital infrastructure fund presentation deck sourced through Nasdaq’s eVestment platform, a GP put it in no uncertain terms calling the current market environment, “a one in 100-year data investment upgrade opportunity.”

Consultant bullish on the sector

Fund managers marketing digital infrastructure funds are not alone in their positive view of the sector. Industry consultants are increasingly recommending the funds to the pension plan clients.

NEPC to Chicago Police

“Digital infrastructure benefitting from push to modernize communications networks–Proved critical to societal resilience and business continuity”

Aksia to LACERA

“Opportunities in Private Infrastructure: Secular Growth: digital infrastructure continues to perform well with strong demand growth from digital traffic”

GCM Grosvenor to San Diego City ERS

“Niche funds continue to represent a growing part of the market, with a focus away from traditional energy funds and towards renewable and digital infrastructure strategies.”

Meketa to Connecticut Retirement

“Digital infrastructure was resilient during COVID and has strong growth trajectories in most geographies for increasing installed fiber, wireless, and data centers.”

Digital infrastructure GPs to watch

Since the start of 2020, the top three fund managers offering digital infrastructure funds have seen over $3.2 billion in reported commitments from public pension plan investors as tracked by Nasdaq’s eVestment. Grain Management saw fifteen commitments over that period flow to their Grain Communications Opportunity Fund III which focuses on opportunities in cell towers and fiber optics. The fund is targeting a $1.5 billion fund size with $2.25 billion hard cap. Other notable GPs raising funds focused on digital infrastructure include I Squared Capital, Digital Colony, IPI Data Center Partners Management, and iCon Infrastructure.

Many of these fund managers are still on their early funds (Funds I to Fund III) and poised to raise larger funds in subsequent vintages as demand for digital infrastructure exposure from public pension plans and other institutional investors continues to grow.

Keep a Pulse on the Market with the Private Markets Monthly Monitor

Published each month, this report aggregates and analyzes data on 475 public plans’ reported fund commitments, as well as the news and documents of most interest to users of the eVestment Market Lens platform across Private Equity, Private Debt, Real Estate and Real Assets.

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