Power surge: How AI and EVs are electrifying A-REITs

The surge of AI into our homes, workplaces and personal devices is having exciting ripple effects for astute property investors who saw early that none of it would be possible without infrastructure to house, power and transmit all the data that humans would generate. 

For the Resolution Capital Real Assets Fund (Class B), winner of the A-REITs category at the Financial Newswire/SQM Research Fund Manager of the Year Awards 2024, holding a range of infrastructure utility exposures has been rewarded through robust demand and limited supply.  

Chief Investment Officer Andrew Parsons, one of the firm’s founders, said as well as demand for data centres, cell towers and transmissions lines, electric vehicles and the push to move away from carbon intensive coal-fired power stations were also creating investment opportunities.  

‘Only 5 to 10 years ago, utilities — electric companies — were seen as very boring,’ he said. 

‘We were using less electricity because we were becoming more efficient in using it. But because of electric vehicles and data centres, all of a sudden this very stable industry is now enjoying phenomenal growth.’ 

The fund allocates approximately 12.5 per cent of its portfolio to global real estate and infrastructure securities listed on international stock exchanges. Of that, 7.5 per cent is invested in areas associated with the digitisation and electrification of the economy. 

Other investments across the fund include office buildings, shopping centres and logistics warehouses as well as infrastructure assets such as airports, pipelines and toll roads, with the aim of providing income and capital growth over the long term. 

The fund has outperformed its benchmark, the S&P/ASX 300 A-REIT Total Return Index, over the long-term, delivering 7.63 per cent per annum net over five years versus 5.46 per cent (as at July 31, 2024). 

It is one of a suite of listed real estate and infrastructure funds that Resolution Capital, an affiliate of Pinnacle Investment Management and majority staff-owned, offers.  

Mr Parsons summarises the firm’s investment philosophy as having a bias towards robust balance sheets and, internally, an appetite for innovation. 

Innovation, he said, was evidenced by decisions the team had made over the last two decades to diversify the Real Assets Fund when opportunities arose that made sense.  

‘We moved part of our clients’ money into global in 2004, and global real estate did far better than domestic real estate in 2006 and 2007,’ Mr Parsons said. 

‘Then again recently, we recognised the benefits of the infrastructure real assets strategy. 

‘That we’ve tried to be innovative in a measured fashion has been one of the hallmarks.’