• Niche investments range from cold storage facilities to media rights
• Fund III around 50% deployed, Fund IV expected to launch by year end
• Professional sports, industrial outdoor storage seen as emerging areas

As wildfires devastated the Los Angeles area in January, aircraft played a pivotal role in suppressing one of the worst fires in US history. Single-engine scoopers skimmed across nearby lakes and reservoirs to fill their tanks before quickly returning to the fire zone, while helicopters made precision water drops to help douse the flames.

These mission-critical aircraft had been on Cloverlay’s radar for years. The Conshohocken, Pennsylvania-based firm specializes in “adjacent private markets” – niche, esoteric, and uncorrelated investments. It has backed fixed-wing and helicopter wildfire suppression platforms, leveraging the fragmentation and inefficiency of the industry in the US.

“Most operators are small business owners, like a guy with four planes, which prevents larger investors from entering the space,” Jeff Collins, managing partner, told Mergermarket.

Collins has been investing in niche asset classes such as aircraft for over two decades. The potential of this strategy became apparent when he was overseeing North American buyouts and special situations at Morgan Stanley Investment Management (MSIM). This resulted in the establishment of Cloverlay in 2015.

“That niche, uncorrelated, less trafficked, pre-institutional part of the market was about a third of what we did each year and in every fund,” he said. “I set up the firm to perpetuate this investment program.”

Cloverlay operates across a diverse range of tangible and intangible assets. Tangible means “core capital assets,” including cold storage facilities and c-band spectrum licenses, as well as resource assets, such as a cacao project in Colombia.

Intangible investments focus on royalty assets like intellectual property (IP) and media rights. Targeted IP ranges from the mechanical to the content-based – from the components inside devices to licensing streams.

Cloverlay’s third fund is around “halfway through,” according to Collins. Fund IV is likely to be launched towards the end of 2025.

Cloverlay declined to specify details as to the size of each of its three flagship funds, but gave the vintages as 2016, 2019 and 2023. The firm added that total assets under management (AUM) is around USD 1.6bn. According to schedule D filings with the US Securities & Exchange Commission, the gross asset value of the funds – not their size on closing – was USD 149m, USD 204m, and USD 174m, respectively, as of March 2025. There are also filings for various other vehicles managed by Cloverlay.

Institutional investors, primarily US public pension plans and hospital systems, make up 70% of the LP base. The rest is high-net-worth investors, including mid-sized family offices – each tends to have around USD 1bn in AUM – and personal relationships built over decades.

Early mover

There are usually 12-15 assets per fund. The sweet spot for individual investments is around USD 40m, although Cloverlay can commit as little as USD 15m and as much as USD 100m.

“Part of our mandate is to be in front of an emerging asset class that has little to no institutional capital, invest, and then move on,” said Collins.

As such, the sponsor’s three funds to date look markedly different because they reflect an evolving opportunity set. Once a segment matures, and institutional capital floods in, Cloverlay is already pushing new frontiers.

“If you compare our Fund III portfolio to Fund I, they don’t even rhyme with each other, because the world changes,” added Collins. “Some areas that were emerging investment opportunities 10 years ago have now become full-blown asset classes.”

Digital infrastructure is a case in point. From Fund I, Cloverlay backed a provider of mission-critical dark fiber solutions in Northern Virginia, which is the leading global market for data centers. At the time, US data centers occupied less than 100m square feet, according to CBRE.

As of 2023, occupied US-based data center space had more than doubled to reach 200m square feet, CBRE showed in a report last year, which also noted that Northern Virginia housed almost half of the entire inventory

As the market has developed, deals involving data centers have increased at a breakneck pace. According to data from sister publication Infralogic, in North America, there were just over USD 20bn of such deals in 2021, which had soared to just over USD 95bn last year. Data center deal flow in 2025 is on pace to eclipse that figure, with USD 44bn recorded year-to-date.

The dark fiber investment, among other Fund I investments, has been exited. Cloverlay’s exit routes vary by sub-strategy, but being able to envisage a path to liquidity is a critical consideration when making new investments.

“Exit scenarios are an integral part of our initial underwriting,” said Collins. “You can own fantastic assets, but if there’s no logical buyer, you’ll have to live with them forever – that’s not the profile of our capital.”

Part of the club

When it comes to deal sourcing, the firm works with a small group of specialist placement agents, but many transactions come from the team’s own networks – a function of having operated in certain ecosystems for long periods of time. For example, a strategic looking to sell an IP asset might make its first call to Cloverlay.

The firm also gets invited into deals by fellow investors. More broadly, this speaks to the collegial nature of a playing field in which transactions often require multiple equity checks.

“Most of our deals are structured as ‘clubby’ collaborations,” said Collins. “One firm leads, we have an operating partner on the ground, and two or three firms collectively execute the investment.”

The 2023 acquisition of Cloudco Entertainment, owner of the commercial rights to Care Bears, fit this profile. IVEST Consumer Partners, which focuses on licensed consumer products and has extensive operational expertise in the space, led the deal. Cloverlay participated alongside other investors, contributing to a USD 100m equity-and-debt pile, according to a press release.

Collins describes it as a “structured playbook” applied to a neglected brand. “We’re not manufacturing the T-shirts – we’re collecting a royalty on every Care Bears product sold globally,” he explained. “The exit path is clear: private equity firms and strategic buyers would love to own the intellectual property behind this brand.”

Professional sports have emerged as another attractive niche. Cloverlay typically finances entities that purchase and monetize media rights, rather than pursuing direct exposure to revenues from live sporting events.

While there has been a rush of capital into major US sports in recent years, Cloverly was an earlier mover, entering in the midst of the pandemic. “We invested in three of the big four US sports in 2020, during the first winter of COVID, when stadiums were still closed,” said Collins.

The firm has explored a wide range of sports globally, from Indian cricket to rugby and Latin American mixed martial arts (MMA). It focuses on sports that are established and well-governed, with leagues that have regulations around elements such as team financing. This ensures the investment opportunity is long-term and, crucially, offers stability.

For this reason, to date Cloverlay has avoided so-called emerging sports. Collins cites pickleball as a flavor-of-the-month play that could already be losing ground to other racket sports despite attracting private equity investment in recent years.

“Padel is emerging, pulling attention away from pickleball – so what happens to pickleball investments? This is why we focus on media rights rather than speculative leagues,” he said.

Building the utility

Litigation finance is another intangible opportunity, which involves third parties funding legal claims in exchange for a share of any proceeds.

A nascent secondary market is emerging, whereby the firm invests directly into cases that have lived far longer than originally anticipated, rather than buying LP secondaries in litigation finance funds. “It’s an innovation in a space that has historically been competitive but stagnant for over a decade,” said Collins.

On the tangible side, meanwhile, wildfire-suppressing aircraft are just one area Cloverlay has been exploring. Collins is arguably most interested in industrial outdoor storage (IOS) spaces, essentially large gravel lots for commercial parking. It is a large portion of the industrial real estate sector that has seen little or no institutional investment. Cloverlay anticipates significant growth.

Fragmentation is a recurring theme. IOS assets tend to be owned by individuals, putting them beyond the reach of mainstream investors. Cloverlay is the bridge to institutionalization, working with an operating partner to execute multiple smaller deals with a view to building a coherent portfolio of scale.

Having proved the model in the US, the firm took it to the UK, notably accumulating an IOS portfolio around London’s Heathrow airport.

The UK represents fertile terrain for the strategy because green belt restrictions mean there is a lack of new space, and much existing space is underutilized. By consolidating assets and optimizing leases – for example, by signing up major logistics companies as customers – IOS will be ready for the next set of investors.

“Once consolidated, we approach real estate private equity funds and ask, ‘Who wants to own the largest IOS portfolio in the world?’” Collins explained. “We call it building the utility, instead of buying the utility.”