Last week saw the launch of the Defiance 5G Next Gen Connectivity ETF (FIVG) from Defiance ETFs, the first, and only ETF in the US to provide targeted exposure to the 5G ecosystem, the firm says.
Paul Dellaquila, Global Head of ETFs at Defiance, explains that the new ETF, with an expense ratio of 0.30 per cent, is designed to encompass the whole 5G ecosystem. “We are trying to get investors exposed to the build-up of the sector which will be scaling up over the next year,” he says. “It is the most exciting technology in 2019 and will be over the next several years.”
The portfolio is limited to US and overseas companies with ADRs in an attempt to keep the costs down, featuring traditional companies such as AT&T and Deutsche Telecom who operate in the network operation space.
However, as 5G waves travel shorter distances than 4G, the portfolio also includes REITs, as there will need to be a significant building programme to ensure more towers and more mini towers within buildings.
The largest part of the portfolio is core equipment manufacturers such as Nokia and Ericsson.
The index underlying the ETF is the BlueStar 5G index. “We spent a lot of time with BlueStar researching companies that will have the biggest impact with 5G,” Dellaquila says. “We studied what the 5G network will look like and how committed companies are to this space.
“The companies in the portfolio are very committed to this network and it is exciting because their vision of what the world will look like is similar to ours.”
Dellaquila explains that the previous G technologies were more about connecting people. “Now, not only can this technology connect people, it also connects places and machines, so you have things like smart cars at a fully operational scale or augmented and virtual reality.”
Virtual reality steps up to aid trainee surgeons who can practise without using a live person, while augmented reality lay behind the Pokémon game craze of a few years ago.
“What 5G is doing is giving you more access to all these emerging technologies and it will be faster, more real and with less latency.”
Dellaquila describes 4G as a two-lane road, with a lane going each way, while 5G will be an eight-lane super highway, with data flowing at a faster pace.
“In certain areas downloading something on your phone can take forever but with 5G it will download instantly. Towers will go up across the US to make smart cities, and across the globe, to capture those signals.”
Dellaquila reports that the response they have received so far from the investing public shows support from retail investors, while he believes there is value for institutional investors as well.
“The unique thing is that there is a growth component with the fund but also a yield component as there are dividend paying stocks in the portfolio which will open up who will be interested in this solution,” he says.
“The technology is in its infancy. We are at the early stages, at the forefront and we have built a solution for investors at a great rate.”
