Indonesia sovereign wealth fund joins data centre boom

[JAKARTA] Indonesia’s first sovereign wealth fund is investing in a mix of funds and private companies as it bets on infrastructure around artificial intelligence, part of a global investment boom in the sector.

The Indonesia Investment Authority (INA) and its co-investors have deployed around 74.5 trillion rupiah (S$5.4 billion) so far, and about 30 per cent of that has gone into digital infrastructure, chief investment officer Christopher Ganis said in an interview.

INA, which manages more than US$8 billion, has closed a handful of digital infrastructure deals, he said, including participating in a funding round for DayOne Data Centres, a spinoff of Chinese company GDS.

The fund’s commitment to AI infrastructure underscores a global rush to invest in data centres and other beneficiaries of the machine-learning revolution. At least US$3 trillion is set to flow into data centre-related investments over the next five years, according to Moody’s Ratings, creating huge opportunities for funds like INA.

Digital is one of five focus areas for the five-year-old fund, which will earmark as much as 30 per cent of its annual allocations to the sector, Ganis said. While “a lot of these AI developments are coming outside of Indonesia, it does not mean that’s a trend that we will just skip”, he said. 

INA expects the AI boom to benefit Indonesia as companies bring training and research centres to the country, which has one of the youngest populations in Asia. Its investment portfolio includes data centres with 72 megawatts of planned capacity and a 100 per cent committed occupancy rate, according to its website. 

At a time when the US and China are competing over AI, Ganis said INA will take a “non-bloc” approach to work with a variety of partners. 

AI is a sector in a “multi-polar world” where countries will push to create national or regional champions, Ganis said. But companies will see Indonesia as a market where they can boost their productivity and expansion, he added.

While the Middle East conflict is putting pressure on net oil importers like Indonesia, Ganis said the country’s existing data centres are operating in industrial zones with secure power supplies. Still, he’s cautious about a further potential surge in oil prices.

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“I don’t think you can make a broad-stroke statement on the impact,” Ganis said, adding that the fund would have to assess factors including future power contracts to see the effect. 

The sovereign fund, which was established in December 2020, has experienced a series of leadership reshuffles recently. Its peer Danantara, with a much larger mandate, is also looking to invest in data centres.

INA started with a focus on investing in private equity with minority shareholding structures, and has since expanded into private credit and real estate.

The vehicle was funded initially with government equity holdings and cash and relied on stock dividends and interest for most of its income. Ganis expects the portion to gradually tail off as investment income makes up a bigger share. BLOOMBERG