Read Arma’s view on how increased capital inflows from ‘real asset’ investors into next-generation infrastructure underscores its unique importance to the global economy in full on Forbes here.
While capital flows into these assets had been growing prior to the outbreak of coronavirus, the pandemic accelerated the trend.
The pandemic has consolidated the dominant position of the largest internet and technology companies, by driving increases in remote working, videoconferencing and content streaming, and fuelled further expansion of the digital economy, with a knock-on impact on demand for the infrastructure that supports digital connectivity, storage and processing power. This includes fixed-line fibre optic networks and data centres.
While capital flows into these assets had been growing prior to the outbreak of coronavirus, the pandemic accelerated the trend. Notably, specialist funds and institutional investors that target ‘real assets’, a term historically encompassing real estate and physical infrastructure, are allocating increasing a proportion of their capital to state-of-the-art data centres and next generation fibre optic networks.
The reclassification of data centre and fibre assets underlines how they have become the building blocks of the digital economy.
Given that real assets’ traditional role in investors’ portfolio mix is to generate reliable, stable yields, requiring minimal operational oversight and acting as a recession-proof diversifier to inherently more volatile equity investments, the reclassification of data centre and fibre assets underlines how they have become the building blocks of the digital economy.
The long-term tailwinds for these investments are also strong, with exponential growth in data volumes, persistent demand for fixed-line internet connectivity and minimal risk of technological obsolescence for fibre-optic cables all offering compelling downside protection.