DoubleLine Briefing: Investing in Data Center Asset-Backed Securities
DoubleLine's ABS team has published a research paper highlighting investment opportunities in data center Asset-Backed Securities (ABS).
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Rhea-AI Summary
DoubleLine's ABS team has published a research paper highlighting investment opportunities in data center Asset-Backed Securities (ABS). The analysis reveals high-yielding prospects with modest risk in this sector, which supports critical technologies from AI to social media. The data center ABS market is experiencing significant growth, with expected issuance of $8 billion in 2024 and potential market size of $50 billion by 2027, up from $25 billion in 2024. The research suggests that subordinate and mezzanine tranches currently offer the most attractive risk-adjusted returns, benefiting from industry dynamics and a stable client base.
Positive
- Market expected to double from $25B to $50B by 2027
- Record issuance of $8B expected in 2024
- Subordinate tranches show strong resilience to stress cases
- Stable revenue stream due to sticky client base
Negative
- None.
Details
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TAMPA, Fla., Oct. 29, 2024 /PRNewswire/ -- In a new research paper, Stephan Diaz Ellinghaus, a Specialist on DoubleLine's Asset-Backed Securities (ABS) team, and Client Portfolio Manager Phil Gioia, CFA, find in data center ABS "high-yielding investment opportunities with modest risk."
The paper, "Securitizing the Digital Present & Future: Investing in Data Center Asset-Backed Securities (ABS)," can be accessed here: https://doubleline.com/wp-content/uploads/Securitizing-the-Digital-Present-and-Future_October-2024.pdf
Data centers provide critical infrastructure, Messrs. Diaz and Gioia write, "to support the technologies that are now critical to people's everyday lives." These include emerging technologies such as machine learning, virtual reality, augmented reality and artificial intelligence as well as established ones, for example, email, messenger, streaming and social media.
Securitization, the authors note, is a rapidly growing avenue for the financing of data center assets. Primary-market issuance is "on track to hit record issuance in 2024, with more than
DoubleLine, they write, is finding compelling opportunities in data center ABS throughout the capital structure. Subordinate and mezzanine tranches at present "offer the most attractive risk-adjusted return profiles. Like the senior tranches, the subordinate tranches are generally resilient to stress cases and benefit from the same industry dynamics and sticky client base and have more attractive spread and yield."
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