Future Fund makes largest data centre investment to date

The fund acquired a 24.1% stake in Canberra Data Centres from Commonwealth Superannuation Corporation in a move that reflects the importance of digital infrastructure assets.

Australia’s Future Fund has made its largest direct investment in a data centre asset by acquiring a 24.1 percent stake in Canberra Data Centres for an undisclosed sum.

The A$168 billion ($114 billion; €103 billion) sovereign wealth fund acquired its stake from the Commonwealth Superannuation Corporation on 23 December and announced it in a portfolio update this week.

New Zealand-based Morrison & Co was managing the stake on CSC’s behalf. CSC is the trustee of five superannuation funds for Australian government and Australian Defence Force employees, with total assets under management of approximately A$48 billion.

CSC sold half of its stake in CDC and retained 24.1 percent that Morrison & Co will continue to manage.

The New Zealand fund manager manages another stake in CDC owned by Infratil, which is listed on both the Australian Securities Exchange and the New Zealand Stock Exchange.

In a statement to shareholders, Infratil said it welcomed Future Fund’s investment and that it continues to be “very positive about the future of [CDC]”.

Future Fund declined to disclose the value of the deal when asked by Infrastructure Investor. However, Infratil said it had provided an independent valuation on 6 January that valued its 48.2 percent stake in CDC at between A$1.27 billion and A$1.60 billion, and that the Future Fund acquisition required no change to that valuation range.

CDC’s management retains 4 percent of the business, which was founded in 2007 and operates five data centres.

Future Fund has had both direct and indirect exposure to data centres through its listed and private equity portfolios, but the CDC deal is its biggest investment in the sector to date.

A spokesman for the fund told Infrastructure Investor: “It’s a space we’ve observed developing and have been conducting research on for some time. The CDC investment, [which is an investment] in an important Australian asset, is the largest direct investment we’ve made in this space. The business is expanding and investing in new facilities and we’re looking forward to supporting the business into that growth.”

In a statement, CDC said Future Fund’s investment would “strengthen the sovereign credentials” of the business and was an endorsement of the importance digital infrastructure plays in the functioning of Australian society.

Federal treasurer Josh Frydenberg said in a speech last year that data centres could be classified as critical infrastructure, meaning foreign investors would be subject to greater scrutiny when acquiring them.

Future Fund’s quarterly portfolio update to the end of December, published this week, showed it had reached A$168 billion in assets under management. This was an increase on the A$165.7 billion recorded at the end of the previous quarter and up from A$147 billion at the end of December 2018.

Its infrastructure and timberland portfolio amounted to A$11.84 billion at the end of 2019, comprising 7.0 percent of its total portfolio. This compared with A$12.51 billion at the end of 2018, or 8.5 percent of total AUM.

Chief executive David Neal said in a statement: “We have been carefully positioning the portfolio to navigate the challenging investment environment. We are maintaining an average level of risk in the portfolio, sitting around the middle of the expected range.

“We continue to prioritise portfolio flexibility to ensure we can adjust the portfolio quickly to respond to emerging opportunities and risks.”

The fund had said last February that it was managing its liquidity closely in order to “balance diversification and flexibility” of its portfolio.

Last May, Future Fund divested its 8.6 percent stake in London’s Gatwick Airport, part of a plan launched in 2018 to sell around A$5 billion of illiquid assets.