By Joshua Franklin
(Reuters) - Digital Colony, a private equity firm backed by U.S. real estate investor Thomas Barrack, has raised $4.05 billion to invest in digital infrastructure, seeking to capitalize on new technologies such as 5G wireless networks and the Internet of Things (IoT), according to people familiar with the matter.
Buyout funds focusing on infrastructure investments have typically put their money in physical assets such as airports, bridges and toll roads. Digital Colony's fund illustrates how investors are now also seeking assets that support the digital economy driven by big data and artificial intelligence.
Mobile operators could invest around $480 billion globally between 2018 and 2020 to upgrade their networks, according to mobile communications industry body GSMA, underscoring the potential size of the investment opportunity.
Digital Colony had set a fundraising target of $3 billion and completed the fundraising at the maximum it could raise, the sources said, requesting anonymity because the details are private.
A spokeswoman for Digital Colony declined to comment.
Digital Colony was set up in 2018 by Digital Bridge Holdings, which invests in communications infrastructure companies and is led by Marc Ganzi and Ben Jenkins, and Colony Capital, where Barack serves as executive chairman and CEO. Barrack is also a friend of U.S. President Donald Trump and was chairman of his 2017 inaugural committee.
Colony Capital fills two of the five members of the fund's investment committee, while Digital Bridge is responsible for Digital Colony's day-to-day investment activities, according to a person familiar with the fund's operations. Colony Capital supports the fund in regulatory, accounting and investor relations matters.
Digital Colony has already committed around half its capital in five deals in North America and Europe, the sources said. Its largest deal so far was the roughly $8.2 billion acquisition of U.S. communications infrastructure provider Zayo Group in partnership with private equity firm EQT Partners.
The fundraising by Digital Colony comes after U.S. infrastructure funds attracted a record $37 billion in 2018, according to data provider PitchBook, amid a dearth of federal and state infrastructure funding for many projects.
Neither PitchBook nor industry tracker Preqin have data on funds raised specifically for digital infrastructure.