Family offices pivot to invest in greener data: ‘the new oil’

Infrastructure has traditionally sat on the fringes of most family office portfolios, overshadowed by real estate, private equity and public markets. But the surge in data demand, driven by artificial intelligence, cloud computing and the internet of things, is now pulling digital infrastructure into the spotlight. Assets such as data centres, fibre networks and telecom towers are gaining traction as investors recognise their long-term value.

Valued at $242.7bn, the global data centre industry is projected to more than double to $584bn by 2032, with North America currently leading at 39 per cent market share, according to Fortune Business Insights.

Digital infrastructure is attracting “a lot of attention”, states Karim Cherif, head of alternative investments at UBS Global Wealth Management. While infrastructure still makes up only 1 per cent of alternative allocations — unchanged since 2022 — almost a quarter of family offices plan to increase their exposure over the next five years, according to the UBS Global Family Office Report 2025.

The appeal lies in resilience and predictability. “These assets are often monopolistic and have strong cost pass-through, making them resilient to inflation and the business cycle,” explains Mr Cherif. “Digital infrastructure is an asset class that’s well positioned from a macro perspective, supported by long-term growth tailwind linked to AI and digitalisation.”

Wider ecosystem

“The digitalisation of our society is clear. We’re all using AI more in our work. Companies confirm this every earnings season,” says Willem Sels, London-based global CIO at HSBC Global Private Banking. Infrastructure, he argues, is the enabler behind AI’s rapid expansion. “Some have called data the ‘new oil’ — it is one of the most valuable raw materials. You need infrastructure to exploit it.”

Investor focus in AI is shifting beyond semiconductors to the wider ecosystem, including infrastructure, software providers and end-users. “With chip valuations stretched and uncertainty around which adopters will see real earnings impact, investors are turning to infrastructure, where they see the most solid and durable upside in the AI ecosystem,” he says.

Historically the preserve of large institutions, infrastructure was often overlooked by family offices seeking flexibility and higher returns, says Will Lawrence, partner at investment advisory firm Cambridge Associates. But the underperformance of real estate over the past decade, coupled with the explosive growth of the digital economy, is changing that mindset.

“We are now seeing increased demand, albeit from a low base. Families realise they are underinvested in this theme.”

Data centres are emerging as modern alternatives to traditional real assets such as toll roads and airports. “Digital infrastructure offers similar hard asset exposure to real estate but with more growth underpinning the opportunity set,” says Mr Lawrence.

Data centres backed by long-term, inflation-linked contracts with ‘hyperscalers’ like Amazon and Microsoft can deliver target internal rates of return of 15 per cent — offering greater downside protection than venture capital.

Access is also improving. Innovations such as evergreen funds and open-ended vehicles are making the asset class more accessible to private capital. Family offices typically prefer access via specialist funds or co-investments, given the complexity of developing and managing these assets.

“For many families, over the last 10 to 15 years, real assets have meant real estate. They had very little in infrastructure,” notes Monica DiCenso, head of the global investment opportunities group at JP Morgan Private Bank. “That’s now starting to change.”

Her team advises around 1,000 clients globally, most of them family offices, and is seeing a clear change in portfolio allocations.

Years of strong equity market performance left many family office portfolios overweight in public equities and heavily US-centric. But recent volatility — including April’s so-called ‘liberation day’ market shock under President Donald Trump — has accelerated a shift toward more diversified, income-generating strategies. Infrastructure, with its low correlation to public markets and stable income streams, fits naturally within a 10- to 20-year investment horizon.

Interest in data centres remains strong, even after a brief scare earlier this year caused by DeepSeek, an efficient Chinese AI model that raised concerns about future power demand. “That caused a bit of a spook, but I haven’t seen any meaningful pullback,” says Ms DiCenso, pointing to continued investment from major hyperscalers.

Powering the digital backbone

Electricity infrastructure is also fast gaining attention. “Our grid is ageing and needs significant investment to support the growing number of data centres and onshoring of manufacturing,” says Ms DiCenso. While sustainability is not yet a top priority for many US family offices, interest is rising, especially in areas like renewables and nuclear. “When you get to the second or third generation, sustainability starts to matter more.”

Energy usage is both a challenge and an investment opportunity in digital infrastructure. “Data and energy are interwoven,” notes HSBC’s Mr Sels.

Efficiency improvements must keep pace with soaring demand, as access to reliable, affordable power is rapidly becoming a critical factor in infrastructure development, shaping site selection, cost structures, and long-term growth potential.

The growing trend is exemplified by KKR and Energy Capital Partners’ new $4bn Texas data centre, co-located with Calpine’s gas plant to integrate compute infrastructure with dedicated power for greater reliability and scalability.

“More and more, energy provision is being built close to the data centres,” says Mr Sels. “Investment solutions increasingly combine digital infrastructure with renewables or utilities. Energy security means a diverse mix — clean sources as well as traditional ones.”

Green credentials are also playing into asset value. The appeal of a “green data centre” goes beyond sustainability, adds UBS’s Mr Cherif. “If you consume less, you have a better-performing asset.”

Buyers are looking for sustainability not just as a value, but as an essential part of exit strategies, explains Cambridge Associates’ Mr Lawrence. Without a sustainable business model, data centre owners may face a narrower pool of potential buyers when selling in the future.

Data centres account for around 1.5 per cent of global electricity use, with demand expected to increase by up to four times by 2035, according to the International Energy Agency. Renewable energy sources are expected to supply around half of the additional electricity required by 2035 to meet growing data centre demand.

Aligning capital with values

Energy sits at the core of digital infrastructure’s appeal for families who want to grow wealth across generations while aligning investments with their values. “Everything we’re doing — AI, digitalisation, crypto — is driving exponential demand for power,” says Erik Christoffersen, head of the multifamily office practice at Alti Tiedemann Global.

With traditional energy sources such as coal, nuclear, and natural gas facing political hurdles or long development timelines, renewables are increasingly seen as the practical solution. Solar, wind and hydro dominate current allocations, but emerging technologies like fusion and heat batteries are attracting growing interest.

Rather than using politicised terms like ESG or impact, many family offices now prefer the idea of “values-aligned investing” — a more neutral framework that blends financial return with social outcomes. “It’s about expressing what matters to them, without using acronyms or terms that right now are either politically charged or carry regulatory challenges” says Mr Christoffersen.

Digital infrastructure paired with clean energy fits neatly within this philosophy. With investment horizons stretching 10 to 20 years, these assets match the long-term goals of rising generations. “The younger generation is no longer focused solely on returns. They’re asking what their money stands for,” he adds. Many are seeking impact beyond personal wealth, and their influence on capital flows and policy will outlast today’s political cycles.

This generational shift is also global in scope. Enhancing access to technology in underserved regions allows families to align investment strategies with goals around digital inclusion and broader social impact. “AI can be a democratiser. If people in emerging markets have access, it can empower them,” says HSBC’s Willem Sels.

Oversupply risks

Despite strong tailwinds, digital infrastructure investing is not without risk. Valuations are high, with some data centres trading at around 25 times Ebitda. “There is a risk of oversupply,” warns Cambridge Associates’ Mr Lawrence. “Manager selection is critical. You need managers who know how to find the right sites, secure power, negotiate contracts and lock in tenants.”

Experience matters. “We favour managers with at least a decade in the sector. Some newer entrants don’t have deep track records, and that’s a concern,” he says. “You don’t want to back undercapitalised operators still struggling to complete builds.”

Even with strong demand fundamentals, overpaying remains a risk. “Vacancy rates for US data centres are below 2 per cent, and 80 per cent of what’s under construction is already pre-leased,” adds UBS’s Mr Cherif. “Just because market fundamentals are strong doesn’t mean you should pay any price.” Diversification across sub-sectors can help manage risk, he says.

There are also technological risks. As AI models like DeepSeek evolve, they may shift power and infrastructure needs, potentially making today’s assets obsolete. And early-stage projects often face delays due to difficulties securing land, permits, utilities or materials, risks that are typically more pronounced in emerging markets. Also, for these reasons, he says, many family offices prefer developed markets such as the US, where infrastructure projects tend to be more stable and predictable. With more than 5,000 data centres, the US accounts for nearly half of the world’s total. (see table)

Digital infrastructure spans multiple strategies, from real estate and energy to private equity. Some of the most promising opportunities, notes Cambridge’s Mr Lawrence, lie in the overlaps, such as smart street lighting, data centre cooling and cloud-enabling services. “It’s about looking across themes, not just sectors.”

Too big to ignore

Infrastructure remains a modest allocation for most family offices, typically comprising 5 to 10 per cent of portfolios. But digital infrastructure already accounts for two-thirds of that slice, according to Cambridge Associates. While liquidity is still limited, this may improve as institutional capital continues to flow into the space.

Ultimately, the question for family offices is not whether to invest in infrastructure, but how. “What does the global economy need over the next 20 years?” Mr Lawrence asks. “Power, compute, and the AI-enabled tools to improve productivity.”

Digital infrastructure offers a pathway to “future-proof portfolios” by capturing long-term growth themes in a resilient, diversified and increasingly accessible way. “Digital infrastructure may never dominate portfolios,” says Mr Lawrence, “but it’s a theme you can’t afford to ignore for the next decade.”