First 5G Telecom ETF Debuts

March 05, 2019

Today Defiance ETFs rolled out an ETF designed to capture the performance of companies involved in the usage and development of 5G networking and communications technologies, according to a press release. The Defiance Next Gen Connectivity ETF (FIVG) tracks a benchmark from BlueStar Indexes.

FIVG comes with an expense ratio of 0.30% and lists on the NYSE Arca exchange.

Methodology

The fund’s underlying index is global in scope and uses a four-tiered weighting methodology.

Segment 1 encompasses companies operating in the areas of core cellular network equipment or satellites that rely on the C-band wireless spectrum, which may be used for 5G communications in the future. The segment represents fully half of the weight of the index.

Segment 2 is weighted at 25%, and involves mainly infrastructure companies such as REITs that operate cellphone towers and data centers, or that provide support services to those operations.

Segment 3 is weighted at 15%, and covers companies supporting the 5G space with quality assurance hardware and software, as well as network testing and bandwidth optimization equipment.

Segment 4 is weighted at 10% of the overall index, and covers companies involved with enhanced mobile broadband modems, new radio technology, and optical fiber cables that are used to build 5G networks.

Within each of the segments, companies are weighted based on modified market capitalization, with caps applied based on the segment. Rebalances occur twice a year. As of mid-February, the index included 57 securities.

First Of Its Kind

This is the first ETF to focus specifically on 5G technology, which will mean much faster cellular networks and overall internet connectivity for end users.

According to Defiance CEO Matt Bielski, “5G is disruption. It is the catalyst of the next revolution of technology. In our view, 5G will likely be the engine behind smart cities, augmented reality, remote virtual robotics surgery, autonomous vehicles and quantum computing, which we expect to roll out in 2019.”

“There’s a ton of focus on the buildout of 5G this year, which is clearly starting. What we wanted to do is build a product that encompasses all the things going into this buildout,” said Paul Dellaquila, Defiance’s global head of ETFs, noting that it’s about more than just the stocks of Verizon and AT&T, which are included in the index.

Dellaquila says FIVG will give exposure to the satellite communications that will be happening, and equipment upgrades that will be taking place nationwide.

“What we wanted to do is build a diversified product that captures the 5G ecosystem as we see fit, and provide something for investors at a very attractive price point,” he added.

Bielski points out that 30 basis points puts FIVG among the lowest-priced thematic ETFs.

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