Its holdings will range from direct investments in data centers to securities issued by real estate investment trusts specializing in the sector.
(Bloomberg) -- The wealth manager to Facebook Inc. founder Mark Zuckerberg and other technology entrepreneurs is starting a unit to invest in data centers to profit from growing demand for cloud-based services.
Iconiq Capital, the San Francisco-based investment adviser run by Divesh Makan, registered a new subsidiary with the U.S. Securities and Exchange Commission last month that will put client funds into technology-related real estate, according to documents filed with the agency. Its holdings will range from direct investments in data centers to securities issued by real estate investment trusts specializing in the sector.
Facebook, the world’s largest social-media company, and other technology giants have already spent billions of dollars building data centers to provide cloud-based computer services to individual customers, according to Anand Srinivasan, a senior analyst with Bloomberg Intelligence. That spending pales in comparison to the amount of funding that will be required as global corporations turn to the cloud to meet their computing needs.
“We are just scratching the surface on the large data center expansion trend,” Srinivasan said. Iconiq, in starting a fund to invest in data centers, “has definitely picked up on a trend.”
The demand for additional capacity has already fueled a surge in the market value of publicly traded tech companies and REITs that own and operate data centers. A basket of seven data-center stocks, including Digital Realty Trust Inc. and Equinix Inc., jumped 31 percent this year through Wednesday, according to data compiled by Bloomberg. That compares with the 7 percent gain by the S&P 500 Index.
“The public REITs in the data-center space have been the best-performing sector of stocks in the past eight months,” Jerald Kent, chairman of TierPoint, a closely held provider of cloud-computing services, said in a telephone interview. “Historically, they are trading at very robust multiples,” said Kent, whose St. Louis-based company owns 39 data centers.
Iconiq referred calls to an outside spokeswoman, who declined to comment. The firm is owned by Makan along with partners Chad Boeding, Michael Anders and William Griffith.
Iconiq opened in 2011, the year before Facebook held its $16 billion initial public offering, the biggest ever by a U.S. technology company. Prior to starting the firm, Makan, Boeding and Anders all worked at Goldman Sachs Group Inc. and Morgan Stanley, two of the main underwriters for the Facebook IPO.
As a multifamily office, Iconiq focuses on providing wealth-management services to Silicon Valley entrepreneurs. It had about $16.7 billion of assets under management at the end of last year, including $4.8 billion in discretionary accounts. According to regulatory filings, clients include Sean Parker, the co-founder of Napster Inc.; Reid Hoffman, the chairman of LinkedIn Corp.; and Zuckerberg, who at age 32 ranks as the world’s fifth-richest person with an estimated net worth of more than $57 billion, mostly in Facebook stock.
While Iconiq primarily helps clients allocate their money to outside hedge and private equity funds, the firm also runs its own proprietary investment vehicles. On Aug. 8, it completed the registration process for Iconiq DC Management, the subsidiary setting up private funds to make real estate investments in data centers or “technology connectivity-related assets,” according to the SEC filing.
The new money manager is organizing its first fund, the filing shows. Once it has raised capital, the funds will make direct investments in property, sponsor or invest in REITs, provide mortgage financing and form joint ventures with other investors.
“Given Iconiq Capital’s broad relationships with some of the world’s leading technology companies and innovators,” the unit is “able to access proprietary market insights unavailable to most sponsors” of investment funds, Makan’s firm said in the filing.