Digital Infrastructure Monthly Report | August

5G ETF Monthly Report: Key Takeaways

• July was a strong month overall in equities and this was reflected in the index, which returned 10.57% during the month with Digital Transmission and Data Networks contributing to over 60% of period returns.

• Data Centers reversed last month’s trend and was the only sector to detract from overall returns as names like Lightspeed Commerce (LSPD-CA) [-3.61%] and VNET Group (VNET-US) [-14.57%] dragged on results.

• Digital Transmission names held 5 of the top ten contributor to return slots as names like Extreme Networks (EXTR-US) [46.64%] and Commscope Holding (COMM-US) [47.55%] helped pull the index higher. Digital Connectivity names like Marvell Technology (MRVL-US) [27.91%] and Skyworks Solutions (SWKS-US) [17.53%] were also additive.

• The ongoing battle in the Digital Processing space saw Advanced Micro Devices (AMD-US) [23.54%] win this month as Intel (INTC-US) [-2.94%] lost ground on the reporting of poor quarterly results. [1]

• 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 the development of emergency services technology that moves position triangulation from two to three dimensions as the US Federal Communications Commission (FCC) recently mandated that emergency services callers’ vertical location must be provided with accuracy within 3 meters at least 80% of the time.[2] Another push to this strategy also comes from the FCC as it has proposed a change to the current definition of “broadband” service pushing for a minimum 100 megabits (Mbps) per second download speed from the current 25 Mbps and a rise to 20 Mbps upload speed from the current 3 Mbps.[3] The White House has announced it is making $401 million available for the development of rural high-speed internet access.[4] The effect of public policy can be seen in all of these points and can be a powerful catalyst in the development and deployment of new technology.

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 31.07.2022)

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/07/2022.

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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