Digital Infrastructure Monthly Report | June

5G ETF Monthly Report: Key Takeaways

• After a few months of declines, the index gained 2.00% in May and from an attribution perspective was driven by Digital Solutions & IP and Digital Processing sectors as these sectors contributed to approximately 150% of period returns. [1]

• Despite the Data Networks sector weighing on overall returns, sector names Switch (SWCH-US) [13.03%] was one of the top ten contributors to return as the company was reported to be the target of an acquisition by any number of potential suitors. [2]

• Digital Solutions & IP names held 7 of the top ten contributor to return slots as names like Serra Nevada (SWIR-US) [41.25%] and Vmware (VMW-US) [18.57%] helped pull index returns into positive territory.

• As we continue to shift from a pandemic to endemic situation, we expect continued acceleration in the shift of the global economy’s embrace of technology, especially in education, remote work, communication, shopping, transacting, and data processing. 

Please note that all performance figures are showing net data. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product.

Macro Outlook

The main driver of this strategy is the Virtuous Circle of capacity creating opportunity, and this 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 stories covering the marked increase in smart building deployments as well as forecasts calling for 150% growth in this space by 2026.[3] The development of structural nuts and bolts that can provide real-time monitoring of material stresses and alert engineers about any potential impending failure,[4] digitized infant pacifiers that can monitor any number of vital signs.[5] A proof point of one benefit of a strong digital infrastructure come in the form of John Deere (DE-US) being able to remotely disable farm machinery that was stolen by Russian troops in Ukraine once they were able to confirm the machinery’s new location outside the borders of Ukraine.[6] Finally, a sure sign that the virtuous circle is alive and well is the report that researchers in Japan have successfully demonstrated a 1 petabit per second (1 million Gigabits!) data transfer rate using existing networking infrastructure. [7]

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. 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.

Digital Infrastructure and Connectivity UCITS ETF Performance Table

(As of 31.05.2022)

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/05/2022.

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.

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