5G ETFs grow amid technology edge power struggle

As developed nations fight the battle for 5G, ETF investors joined the front and poured over $355 million in Thematic 5G ETFs this year. The Defiance 5G Next Gen Connectivity ETF (FIVG) received the biggest share of net inflows ($230 million), followed by First Trust Indxx NextG ETF (NXTG, $100 million) and Esoterica NextG Economy ETF (WUGI, $18 million). All ETFs generated double digit gains in 2021 led by the Canadian version of the First Trust Indxx NextG ETF (+33%). WUGI came in second (+25%) and FIVG third (+22%).

Undisputedly, the 5G roll-out is set to empower the next generation of technology that will drive the global digital economy. With higher speeds, superior reliability and ultra-low latency, 5G will impact every industry, making remote healthcare, precision agriculture, safer transportation, digitized logistics and much more, a reality.

According to a Global Mobile Suppliers Association (GSA) report, 58 countries had 5G networks as of June 2021, up from 38 about a year ago. A dozen more have had 5G mobile technology deployed in part. It is in fact expected that 5G will reach 1 billion users in 3.5 years, compared with 4 years for 4G and 12 years for 3G.

European investors can directly access this growing theme through the First Trust Indxx NextG UCITS ETF ($11 million in total assets). The fund tries to mimic the investment results of the Indxx 5G & NextG Thematic Index and invests in companies involved in the research and development of the 5G cellular technology and next generation technologies.

As of December 15th, 2021, the United States has the highest exposure (40.6%), followed by Japan (9.6%), India (7.2%) and Taiwan (7.1%) among others (35%). The Information technology sector constitutes 60% of the portfolio, followed by Communications Services (30%), Real Estate (8.15%), Consumer Discretionary (2.23%) and Industrials (0.9%). The fund's top 10 out of 103 holdings include AMD, NVIDA, Qualcomm, Xilinx, Apple, Broadcom, Arista Networks, Marvel Technology, Tech Mahindra and Keysight Technologies, representing around 17% of the total net assets. Year-to-date, the fund attracted $8.8 million in net inflows and generated a positive +12% gain. The fund has a total expense ratio of 0.7% and trades on the London Stock Exchange in US dollars (NXTU LN) and pound sterling (NXTG LN) and in Euros (NXTG IM) on the Borsa Italiana.

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