Digital Infrastructure Monthly Report | July

5G ETF Monthly Report: Key Takeaways

• June was a tough month that saw the index decline -11.12% and from an attribution perspective was driven by Digital Processing and Digital Connectivity sectors as these sectors contributed to approximately 49% of period returns.

• Data Centers were the only sector to have a positive contribution to returns with GDS Holdings (GDS-US) returning 19.29% for the month and VNET Group (VNET-US) gaining 6.90%.

• Digital Transmission names held 3 of the top ten contributor to return slots as names like Ceragon Netrosk (CRNT-US) [45.20%] and Cambium Networks (CMBM-US) [2.52%] helping combat the drag of Digital Connectivity names like Marvell Technology (MRVL-US) [-26.41%] and Skyworks Solutions (SWKS-US) [-14.91%].

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

Source of all data: Tematica Research. 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 and when you invest in ETFs your capital is at risk.

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 news of researchers that have developed a new type of network switch [1] that looks promising for use in yet to be deployed 6G networks that are forecast to be able to transmit data at not just gigabit speeds but well into terabit territory[2]. Sticking with 6G development, Nokia’s CEO posited that while he sees 6G networks operational by the end of the decade he does not see the cell/smartphone as the primary network user [3] which, to us, means that there will be a great deal of development occurring between now and then. We are thinking about AR/VR interfaces, integrating IoT into just about everything, and of course, autonomous vehicles.

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 30.06.2022)

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/06/2022.

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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