5G ETF powers Defiance past $500m in assets

Aug 21st, 2020 | By | Category: Equities

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The success of the Defiance Next Gen Connectivity ETF (FIVG US) has helped to drive Defiance ETFs past the $500 million assets under management milestone.

5G ETF powers Defiance to $500m in assets

Defiance ETFs’ 5G ETF, FIVG, has helped lift the issuer’s assets under management above $500m.

As of market close August 20, 2020, total assets across the Defiance ETFs range stood at $504m.

The vast majority of these assets were in the issuer’s 5G ETF which houses some $468m, with the remainder in its quantum computing and junior biotechnology ETFs.

“Despite a global pandemic that has generated uncertainties across many sectors, we have continued to bring innovative first-to-market ETFs that are in high demand by both retail and institutional investors,” commented Matthew Bielski, Chief Executive Officer at Defiance ETFs.

FIV5 was launched by Defiance in March 2019 and has proved to be something of a blockbuster product. So far this year it has gathered cumulative net inflows of $268m and has increased in size by almost 200%.

Interestingly, asset growth appears to be being driven by strong investor demand for the specific exposure rather than the performance of the underlying holdings lifting fund assets like a rising tide. While the fund is up a very reasonable 12% year to date, this is only marginally ahead of the broader communication services and some way behind the returns of the technology sector.

Investors in the ETF seem to be allocating to it in anticipation of future outperformance rather than piling into an already strong performing momentum trade.

The technology certainly has the potential to make waves.

Short for ‘fifth generation’, 5G refers to the latest generation of cellular mobile communications and the innovation and infrastructure that supports it. Its adoption should provide faster speeds, more functionality, and lower latency, helping to transform work practices and daily life.

In turn, this could provide the catalyst for exciting new technologies, paving the way for the rollout of concepts such as the Internet of Things, smart cities, augmented reality, autonomous vehicles, and telehealth.

The ETF achieves this target exposure by tracking the BlueStarGlobal 5G Communications Index – a rules-based index that measures the performance of a group of US-listed stocks of global companies that are immersed in 5G.

To be eligible for selection, a company’s business activities, products, or services must be involved in the development or rollout of 5G network. This includes core carrier-grade networking equipment including cellular antennas and routers, mobile network operators, satellite-based communications, enhanced mobile broadband chips, new radio technology, wireless network test and optimization equipment, cloud computing equipment, software-defined networking or network functions virtualization, fibre optic cables, or cell tower and/or data centre real estate investment trusts.

All securities selected for inclusion must have a maximum average bid-ask spread of 1% and a minimum free-float percentage of 10%. Mobile network operators and REITs must have a float-adjusted market capitalization of $1bn or greater, all other companies must have a float-adjusted market capitalization of $150m or greater. In addition, all companies must have a six-month average daily value traded of $250,000 or greater.

Constituent weightings are determined according to a tiered market capitalization weighting strategy that ensures diversification across different activity categories.

There are currently 78 holdings. Major positions include Qualcomm (6.1%), NXP Semiconductors (5.1%), Ericsson (5.1%), Analog Devices (4.4%), Xilinx (3.6%), Nokia (3.4%), Verizon Communications (2.9%), Skyworks Solutions (2.8%), Maxim Integrated (2.7%) and American Tower (2.7%).

The fund is listed on NYSE Arca and comes with an expense ratio of 0.30%.

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