Technology companies still have significant real estate needs, and some exchange traded funds focus on that theme. Add the newly minted Global X Data Center REITs & Digital Infrastructure ETF (VPN) to that list.
Less than a month old, VPN follows the Solactive Data Center REITs & Digital Infrastructure Index, which is comprised of companies operating data center real estate investment trusts (REITs) and other real estate firms holding digital infrastructure assets. One of the primary benefits offered by the new VPN is that many of its holdings are under-weighted or not found in traditional REIT ETFs.
“For investors, data centers and cellular towers marry elements of growth-oriented technology investing, with income-oriented real estate,” writes Global X Analyst Pedro Palandrani. “As disruptive technologies like the Internet of Things, Artificial Intelligence, and Video Games & Esports require vast amounts of data storage and processing, demand for data centers and cell towers could continue to surge, along with hardware that powers these structures.”
VPNs: Not Just for Internet Security
VPN is home to cell tower REITs, data center REITs, and similar facilities – these cell towers and data processing centers store the information and handle the orders that start the e-commerce process, making the fund a diverse play on some of the most important emerging technological themes.
Data and infrastructure real estate investment trusts (REITs) are pivotal pieces of the 5G puzzle and VPN is the only fund explicitly dedicated to those REITs. With an expense ratio of 60 basis points, the ETF also offers dividends as a source of income to investors. Additionally, there’s an element of environmentally responsible investing with data centers.
“Data centers are traditionally large, windowless, warehouse-like buildings that host their tenant’s networked computer servers,” according to Palandrani. “In exchange for regular rent payments and fees, data centers provide physical space, cooling, power management, and security to their tenants, but rarely own or operate their own servers. Unlike other REITs, data center leases are primarily based on power capacity usage ($/kW) rather than square footage. This business model gives tenants significant flexibility to scale their infrastructure and computing needs.”
VPN is important as the 5G rollout takes hold. The concept is that 5G will be ubiquitous, and someday gadgets like your vacuum cleaner or lawnmower might use 5G. It’s often claimed to be one of the most important milestones in technology and, with companies like Verizon creating ads that suggest, it offers “unprecedented power” for consumers. 5G will be more reliable, faster and pervasive.
The new ETF charges 0.50% per year, or $50 on a $10,000 investment.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.