Blackstone (BX -0.03%) has a long history of delivering outsized returns for investors in its funds. The leading alternative asset manager has achieved 15% net returns annually in its corporate private equity and opportunistic real estate funds over the last 30 years. While many factors have helped drive its outperformance, picking the right sectors is a major contributor.

On the company's second-quarter earnings call, COO John Gray stated: "Where you invest matters, and we continue to benefit from our thematic emphasis on winning areas." Two themes he highlighted on the call were infrastructure and energy transition. Here's a closer look at how investors can follow along with the leading alternative asset manager's highest-conviction mega investing themes.

The $1 trillion arms race

Gray commented on the call that:

There will be massive funding needs over the next 15 to 20 years for infrastructure projects globally, notably including digital infrastructure and energy transition, where we are building sizable platforms. First, in digital infrastructure, there is a well-publicized arms race happening in AI. And the major tech companies are expected to invest $1 trillion over the next five years in this area, mostly to data centers.

As Gray mentioned, Blackstone is investing heavily in these themes to capitalize on the growth it sees ahead. In 2021, it bought data center REIT (real estate investment trust) QTS Realty for $10 billion, noting at the time that the investment aligned with one of its highest-conviction themes: Data proliferation. 

Not everyone can invest directly with Blackstone and participate in the returns its funds deliver for investors as it capitalizes on these high-conviction themes. However, investors can still follow its thematic approach to benefit from the $1 trillion data infrastructure investment frenzy. Three top alternative investment options to consider are:

  • Equinix (EQIX -0.91%): The leading data center REIT has the strongest financial profile in its peer group. That gives it lots of flexibility to capitalize on opportunities to expand its operations. It drives the REIT's view that it can grow its adjusted funds from operations (FFO) by 7% to 10% annually through 2027 while delivering 10%+ annual dividend growth.
  • American Tower (AMT -0.70%): The leading infrastructure REIT acquired data center operator CoreSite Realty for $10.1 billion in 2021. The company believes its integrated platform of towers and data centers positions it to deliver continued growth and strong returns for its investors in the coming years. 
  • Brookfield Infrastructure (BIP -0.80%) (BIPC -1.04%): The global infrastructure operator has a growing data platform, including towers and data centers. It has agreed to acquire two more data center businesses this year. It's investing in European data center operator Data4 and North American developer Compass Datacenters. The company has been rotating its portfolio to capitalize on key investment themes like data infrastructure. That strategy enhances Brookfield's ability to grow its FFO (which it sees rising at a more than 10% annual rate in the near term) while increasing the dividend by 5% to 9% annually.

The multi-trillion-dollar transition tailwind

Gray also highlighted the decarbonization megatrend on Blackstone's call. He pointed out: "We expect our investors will benefit significantly from the powerful tailwinds in this rapidly growing sector. In energy transition, decarbonization is projected to require $4.5 trillion of annual investment over the next 25 years, further supported by legislative action globally."

The company has also been investing heavily in energy transition plays. Gray noted on the call that one of its investing partnerships took a 19.9% interest in NIPSCO, a utility controlled by NiSource. Blackstone will invest alongside NiSource to decarbonize that utility by replacing its coal-fired power generation with renewable energy over the next five years. Blackstone's funds also invested more money into one of its existing portfolio companies, Invenergy, the U.S.'s largest private renewable energy developer. 

Investors can also follow Blackstone's thematic approach to energy transition even if they can't invest directly in one of its funds. Two top alternative options to consider are:

  • Brookfield Renewable (BEP 0.19%) (BEPC 0.09%): The sibling of Brookfield Infrastructure is a global leader in renewable energy. It's investing heavily to develop additional renewable energy capacity around the world. It has also taken a more direct approach to decarbonization by recently agreeing to privatize an Australian utility and replace its coal-fired plant with renewables.
  • NextEra Energy (NEE -1.36%): The global leader in producing power from the wind and sun has an enormous backlog of new capacity additions underway. The utility expects to grow its adjusted earnings by 6% to 8% per share through 2026.

Capitalizing on enormous trends

Blackstone's thematic investment approach has helped drive its strong investment returns over the years. Digital infrastructure and energy transition are among its highest-conviction investing themes right now. Investors won't want to miss out on those multi-trillion-dollar megatrends, which is why they should follow Blackstone's lead by investing in companies focused on benefiting from these high-conviction themes. Doing so could enable investors to earn strong returns in the coming years.