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Digital Infrastructure Monthly Report | January

 

  • Digital Infrastructure and Connectivity, the underlying themes of our Digital ETF, have become increasingly infused into commercial and consumer experiences worldwide from music, movies and video games to education to increased acceptance of remote work and virtual meetings.
  • The 2020 Coronavirus pandemic greatly accelerated the global economy’s embrace of technology, especially education, remote work, communication and data processing. 
  • 5G represents an upgrade cycle in this sector; it is at currently the fifth such opportunity for infrastructure and connectivity focused companies.
  • A new administration in Washington implies a position shift to infrastructure development for both physical and digital systems.

 

Performance Review

  • The Index rebalanced this month and saw 5 names exit on reduced revenue exposure and added 2 new names; Cambium Networks Corp (CMBM) and Lightspeed POS Inc (LSPD) 
  • Digital Services & IP and Data Networks names led for the period 
  • A strengthening TWD and JPY added marginally to returns while EUR had a neutral effect
  • Top ten names contributed to roughly 46% of index returns 
  • Bottom ten names detracted to -5.23% of index returns

 

Tematica BITA Digital Infrastructure and Connectivity Index Performance

December

12 Month*


6.64%


47.69%

Past performance is no guarantee of future performance.

Source: Tematica Research, BITA *12 Month figures based on 31.12.2019 – 31.12.2020

 

While the first two months of the past quarter saw some give and take among Digital Processing names on upgrade cycles for both processors and video game consoles, the quarter finished fairly evenly with names from all six segments appearing in the top ten contributors to return for the period.

While Renesas Electronics (6723:JP) was a name that did not qualify on reduced revenue exposure in the December rebalance of the Digital ETF, it did manage to bow out gracefully, posting a 15.95% return up to December 18th. Picking up that pace was a new Data Networks name Lightspeed POS Inc (LSPD), posting a 16.12% return from the 21st of December through the end of the month.

With the global approval and rollout of various vaccines, the “return to normal” that was top of mind in Q4 is slowly starting to become a reality in certain parts of the world. Still, the trends that were put in place in 2020 show no signs of reversing any time soon.

Past performance is no guarantee of future performance. Source of all data Tematica Research. All data as of 31.12.20

Digital Infrastructure and Connectivity UCITS ETF Performance

Total Return NAV to Date (up to 31.12.2020)

 

1M

3M

6M

YTD

12M

Since Inception*

Digital Infrastructure and Connectivity UCITS ETF

6.55%

-

-

13.27%

-

13.27%

Tematica BITA Digital Infrastructure Index

6.64%

19.88%

30.50%

47.69%

47.69%

13.63%

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. Source: Bloomberg / HANetf. Data as of 31.12.2020 *Fund inception: 08.10.2020

 

Industry News

The Federal Communications Commission (FCC) is in the final weeks of completing the latest auction for available 5G spectrum[1]. While analysts had predicted a total bidding pool of $47 billion, the 57 participants surpassed that total early in the process and at the end of December were rapidly approaching $80 billion in total bids. While these numbers are impressive (and a boon for the FCC) it is perhaps the clearest catalyst for Digital Infrastructure names in recent memory. Future owners of this new spectrum are facing capital expenditures targeted at Digital Infrastructure names. Future users of this spectrum are busy building out the devices and tools that will look to maximize this new spectrum. This plays directly into Digital Infrastructure’s virtuous circle that underpins this strategy.

5G adoption rates as measured by Omdia[2] show that 225 million 5G subscribers were added in the year period ending September 30th 2020 which represents a 4x multiple over the time it took the 4GLTE user base to add as many users. Clearly another bullish signal not only for 5G adoption rates but also demand for both devices and backhaul spending.

 

Rebalance News 

Pre- Rebalance (30.11.2020 – 18.12.2020)

Ranked Segments

Ranked Weighted Segment Returns

Digital Services & IP

1.80%

Data Networks

1.45%

Digital Transmission

1.08%

Digital Processing

0.92%

Digital Connectivity

0.57%

Data Centers

0.16%

Past performance is no guarantee of future performance. Source of all data Tematica Research. All data as of 31.12.20

 

Post- Rebalance (21.12.2020 – 31.12.2020)

Ranked Segments

Ranked Weighted Segment Returns

Digital Processing

0.46%

Data Connectivity

0.38%

Digital Networks

0.26%

Digital Transmission

0.19%

Digital Centers

0.12%

Data Services & IP

-0.31%

Past performance is no guarantee of future performance. Source of all data Tematica Research. All data as of 31.12.20

 

Digital Infrastructure and Connectivity UCITS ETF Performance Attribution Tables

Ticker

Top 10

Period Return

Contribution to Return

Segment

6723:JP

Renesas Electronics

17.51%

12.78%

Digital Processing

INSG

Inseego Corp.

55.79%

6.15%

Digital Services & IP

2454:TT

Mediatek

8.00%

5.57%

Digital Processing

MXL

Maxlinear

22.21%

4.48%

Digital Connectivity

VNET

21Vianet Group ADR

22.41%

3.00%

Data Centers

DY

Dycom Inds.

20.14%

2.99%

Data Networks

INFN

Infinera

23.88%

2.95%

Digital Transmission

PYPL

Paypal Holdings

9.38%

2.74%

Data Networks

PD

Pagerduty

21.15%

2.70%

Data Networks

IRDM

Iridium Communications

22.55%

2.70%

Data Networks

 

Ticker

Bottom 10

Period Return

Contribution to Return

Segment

6701:JP

NEC

-0.55%

-0.05%

Digital Transmission

SBAC

Sba Comms.

-1.76%

-0.16%

Digital Transmission

ERIC

Ericsson ADR

-2.37%

-0.26%

Digital Transmission

WIX

Wix Com

-2.14%

-0.30%

Digital Services & IP

NOK

Nokia Corp

-2.98%

-0.33%

Digital Services & IP

AMT

American Tower

-2.92%

-0.33%

Digital Transmission

CCI

Crown Castle Intl.

-5.00%

-0.55%

Digital Transmission

XLNX

Xilinx

-2.60%

-0.60%

Digital Connectivity

AMD

Advanced Micro Devices

-1.03%

-0.83%

Digital Processing

NVDA

Nvidia

-2.59%

-1.82%

Digital Processing

Attribution analysis is calculated by comparing the weighted period price return of a security to the net of taxes total return index results and as such represents an approximation of the impact a name or group of names has had on the overall index returns for the period. 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. Source: Tematica Research. Data as of 31.12.2020

 

Outlook

A recent report published by MIT Technology Review in collaboration with Ericsson revealed that service providers revenues from existing services will grow 0.75% annually through to 2030, while new value-added services revenues due to the rise of 5G will grow 11% annually with an additional revenue opportunity of $700 billion.[3]

The global COVID-19 pandemic has spurred massive spending increases on data centers from the world’s largest data center operators—led by Amazon, Google, Facebook and Microsoft—which spent a record $37 billion in the third quarter of 2020. Total Capex spending on data centers by these 20 market-leading hyperscale companies jumped to nearly $100 billion in the first three quarters of 2020, representing an increase of 16 percent year over year.[4]

The increasing global dependence on the internet coupled with the virtuous circle of increased storage and processing capacity leading to more use and innovative application development is an ongoing process. With upgrade cycles like 5G (and 6G in the next decade) present both a short- and long-term opportunity for those companies that provide goods and services to the various segments in the digital infrastructure and connectivity space.

 

Fund Details

Digital ETF, is a UCITS compliant digital infrastructure ETF domiciled in Ireland.  

Our technology ETF captures the companies that enable the digital applications of today and those that will redefine how people work, live and play tomorrow.  It provides exposure to the explosive growth of the digital infrastructure virtuous cycle of expanding data, applications, and bandwidth that drives exponential network growth and development of new technologies.   

Please remember that the value of your investment may go down as well as up and past performance is no indication of future performance.

EXCHANGE BB CODE RIC ISIN CURRENCY TER

London Stock Exchange

DIGI LN

HADIGI.L

IE00BL643144

USD

0.69%

London Stock Exchange

PIGI LN

PIGI.L

IE00BL643144

GBP

0.69%

Borsa Italiana

DIGI IM

DIGIT.MI

IE00BL643144

EUR

0.69%

XETRA

DIGI GY

DIGI.DE

IE00BL643144

EUR

0.69%

 

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