APG, Aware Super bet on digital infra mega trends
APG and Aware Super's recent deal in the European digital infrastructure sector indicates growing appetite among asset owners to invest in sector opportunities with different risk-return levels while capitalising on evolving mega trends.
The two asset owners, along with Stonepeak and the Investment Management Corporation of Ontario (IMCO), participated in a $2.3 billion equity recapitalisation of euNetworks, a Western European bandwidth infrastructure company, signaling their belief in digitalisation as a key driver of future growth.
For Aware Super, this deal also marks a significant milestone in its global strategy and is the first infrastructure deal for the $121 billion super fund since opening its London headquarters last September, according to Mark Hector, Aware Super’s head of infrastructure.
Also read: Aware Super eyes property, infra investments from London base
“As our fund continues to grow infrastructure assets, which is roughly 11% of the overall AUM, our broader investment strategy includes global diversification to find the most attractive returning investments,” Hector told AsianInvestor.
Aware Super
As an Australian pension fund, Aware will also continue to make infrastructure investments in its home market, where it has almost two-thirds of its infrastructure asset base.
“We currently have around 20% of our infrastructure portfolio in North America and 15% in Europe,” said Hector.
The super fund sees Europe as a very deep, diverse and mature market for infrastructure investment opportunities in terms of its broad range of sectors and subsectors including in our digital and energy transition focus areas.
“There are considerable new-build requirements for infrastructure across Europe and globally and there is also significant secondary market activity,” said Hector
“We currently have a small London infrastructure team that will expand over time. They will continue to be supported by Australian team resources and local equity partners as we build up our European presence and experience.”
DIGITAL DIVERSIFICATION
The euNetworks deal further diversifies Aware Super’s digital infrastructure holdings as it sits in the nexus between its investment into Switch DC in America, which is a pure-play data centre platform, and Vocus and 2 Degrees, which is a pure fibre play in Australia and New Zealand, according to Hector.
“There has been an explosion in the need for high bandwidth connectivity providers in light with the increase in data consumption and growing number of businesses relying on fibre and cloud adoptions,” he said.
The increasing use of AI applications is also expected to drive a significant increase in data transfer volumes for pushing for additional bandwidth requirements,” said Hector.
The super fund considers digital to be an important growth driver within its broader infrastructure portfolio.
“We do value the importance of prudent levels of diversification within the overall portfolio to manage long-term uncertainty as well as broader value-add opportunities,” said Hector.
“We therefore balance our digital exposures with a variety of other sectors/sub-sectors such as energy transition, registries, transport and infrastructure-like agricultural assets to provide optimised portfolio wide outcomes for members.”
APG'S MEGA TRENDS
For APG Infrastructure, meanwhile, the euNetworks deal is part of investing in various megatrends that will be key to the future growth of its portfolio, said Laurens-Jan Sipma, senior portfolio manager, infrastructure at APG.
APG
“Digitalisation is one of these megatrends, which is a cornerstone to the existing and future portfolio of APG," Sipma told AsianInvestor.
The Netherlands-based APG Asset Management, managing approximately $638 billion in assets, has been an early mover in the digital infrastructure space, with telecom investments dating back a decade.
Also read: APG seeks partners for asset owner-led infrastructure fund
The fund's digital infrastructure portfolio has been expanding rapidly, with more recent investments in fibre platforms in the US and a Dutch TowerCo joint venture with KPN.
"euNetworks is a key new investment as it plays a crucial role in the European ultra-high bandwidth connectivity. It is, therefore, a key player in the further digitalisation of Europe by providing large cloud players [with] the facilities to enhance their network and services," said Sipma.
BALANCING ESG AND RETURNS
Both APG and Aware Super emphasised the importance of environmental, social, and governance (ESG) factors in their investment decisions.
“Digital infrastructure investments are carefully aligned with our commitment to sustainable development goals, ensuring that each venture contributes positively to ESG standards,” said APG's Sipma.
Also read: APG's Singapore CEO: Sustainable investing is taking centre stage
"We strive towards a balanced portfolio from a risk-return, country, sector perspective. Digital infrastructure investments do definitely have various long-term infrastructure characteristics such as - most often - inflation protection mechanisms and long-term contracts," added Sipma.
He added that digital infrastructure assets can also provide diversification within the broader portfolio as most assets have a secular growth trajectory separate from GDP growth.
“There are opportunities at a different risk levels, however, at the right return profile, and subject to having the right infrastructure characteristics, these could be very compelling investments to balance the lower risk-return investments in our portfolio such as investments in electricity grids, toll roads, and more core infrastructure.”