Data Demand Drives This Real Estate ETF | ETF Trends

Here enough about themes such as internet usage, the 5G rollout, cybersecurity, cloud computing and more, and you’re sure to hear something about data centers. The Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (SRVR) is the premier avenue for playing data center demand on the real estate side.

The Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF is a strategy-driven ETF that aims to offer investors exposure to U.S. companies that generate the majority of their revenue from real estate operations in the data and infrastructure sector. There are significant real estate demands associated with the 5G rollout, enhancing the 5G ETF status of the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF.

“A data center can be thought of as part real estate part high tech firm. It is a location that houses critical IT infrastructure for both organizations and the internet at large,” according to a recent research note from DWS. “While potentially resembling a run-of-the-mill office building from the outside, the inside consists of specialized floorplans and equipment such as servers and networking devices, as well as back-ups for cooling or power.”

Data and infrastructure real estate investment trusts (REITs) are pivotal pieces of the 5G puzzle and SRVR 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.

Sizing up SRVR

SRVR 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.

“Generally speaking, owners of these data centers rent out the facilities to clients which often utilize the data centers as traditional ‘enterprise’ solutions to keep servers and data safe,” notes DWS. “Others utilize the facilities in order to tap into a network effect, connecting to other service providers at these crossroads of the internet that often possess more private and secure connection possibilities.”

While history doesn’t always repeat, it’s worth acknowledging that history is on SRVR’s side as data center REITs have a tendency to outperform broader REIT benchmarks.

“Data centers, as represented by the MSCI US REIT Index’s data center securities, have seen an average of 21.1% in annualized total returns over the past five years,” according to DWS. “This has easily beaten out the broader global infrastructure market for the same time frame, and a variety of subsectors as well. 10-year annualized returns—at over 16%– are also impressive, but it is clear that the spike in internet traffic may be having an outsized impact on this sector and the performance of its securities.”

Last week, investors pulled $24.12 million from the $3.2 billion HYD, but what’s more important than ever with the NAV dislocation, investors were able to efficiently transact in the fund.

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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.