Digital Infrastructure Monthly Report | December

5G ETF Monthly Report: Key Takeaways

• We continue to see Covid-19 related restrictions and supply chain issues putting some continued pressure on the overall global economy. [1] Still, we see this as a short-term phenomenon that should be a minor inconvenience for 5G, data centre, network infrastructure and other deployments. If anything, these problems and the rise of the omicron variant provide additional tailwinds for the strategy
• The index advanced 2.00% in November and from an attribution perspective was barrelled. November saw Digital Processing names contribute to just under 200% of period returns which was offset by Data Networks names (the only negative segment) which had a negative contribution of approximately 120%. [2]
• While posting a 27.81% return for November Digital Processing name Nvidia (NVDA) was hit with a setback at the end of the month as the Federal Trade Commission filed a lawsuit to stop the acquisition of Softbank subsidiary ARM on the premise that Nvidia controlling both the intellectual property and ability to produce chipsets would be anti-competitive. [3] Despite that, all signs point to demand remaining vibrant for data center and gaming chipsets.
• Fallout from potential crypto legislation continued to affect PayPal (PYPL) and Square (SQ) as both names declined approximately 20% over the month. [4]
• The Coronavirus pandemic continues to accelerate the global economy’s embrace of technology, especially in education, remote work, communication, shopping, transacting, and data processing. [5]

Please note that all performance figures are showing net data.

Macro Outlook

The main driver of this strategy is the Virtuous Circle of capacity creating opportunity and opportunity, once seized, prompting the need for more capacity. As thematic investors, we break the economy into three components: consumers, corporations, and public policy. When we see consumers and corporations pulling in the same direction, we know we have a solid investing theme. When public policy joins them, setting performance thresholds or providing development incentives such as public works projects, all three are moving in the same direction, creating powerful thematic tailwinds, which is precisely what we see for digital infrastructure development.

Signals that the Virtuous Circle is alive and well include November announcements such as Microsoft’s (MSFT) intent to create a 3-D environment6 dubbed “Mesh For Teams,” [6] Facebook (FB) and its metaverse while Nvidia discusses its Omniverse vision. A Microsoft prototype environment has been developed with consulting firm Accenture and has been used to provide meeting spaces and assist in onboarding new employees. Cruise, General Motors autonomous driving subsidiary has started providing driverless rides to employees and select members of the public in San Francisco. [7] Sanford University announced that it will begin offering a course set entirely in Virtual Reality aptly titled “Virtual People” (in the course catalogue as COMM 166/266). [8] Supporting the view that broadband access is becoming more of a right than a privilege, the German government recently amended their Telecommunications Act so that customers of German ISPs who experience lower than expected bandwidth speeds may apply for reimbursement from the provider. [9]

These and other announcements keep us optimistic that current supply chain woes and silicon shortages will be resolved in the coming quarters if only due to demand for hardware spurring further development. Now that the infrastructure bill has passed, we remain excited about this spending bill in that more bandwidth and storage only serve to spur the economy to develop uses for that new capacity, reinforcing the virtuous circle. This focus on the development of a nation’s digital infrastructure as vital to its future competitiveness is evident in many countries around the world, and as we look forward to emerging technologies such as AR/VR and the metaverse, it will only become more critical.

5G ETF Performance (As of 30.11.2021)

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30/11/2021.

Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Please note that all performance figures are showing net data.

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