Esoterica Capital has launched the first active ETF that invests in the 5G ecosystem. The Esoterica NextG Economy ETF (WUGI) began trading on Cboe on Tuesday with an expense ratio of 0.75%.

Esoterica co-founder and chairman Karan Trehan said the speed, responsiveness and capacity of 5G will transform the world’s data economy.

“We have assembled a portfolio of 35 or so companies principally in the US and Asia (China, Taiwan), that are expected to benefit disproportionately from this digital transformation,”Trehan said. “The ETF is non-diversified, with high conviction holdings.”

The Esoterica investment team, based in the US and in China, said they have developed an investment framework to identify winners over market cycles.

“As such, at this point of time, these are companies that are exposed to, and benefit from, advanced silicon architecture and manufacturing, in the convergence of 5G wireless network and cloud computing, in new software stack that addresses the exponential growth of data, and in enabling technologies across a range of verticals,” Trehan said.

Esoterica CEO and co-founder Bruce Liu highlighted the state of 5G:

  • 5G wireless network global deployment: despite the impact of COVID-19 virus, China is still leading the charge, evidenced by the newly announced “new infrastructure construction” policy where 5G is the key theme. In the U.S., carriers also plan to accelerate 5G deployment: E.g. Verizon just raised its Capex to $18.5 billion in 2020.
  • 5G smartphone shipment: China is expected to account for 75% of global smartphone shipment in 2020, but this market is hit the hardest by COVID-19 so far. The silver lining is, companies such as Xiaomi, Oppo, and Vivo are starting to see evidence that of a bottoming.
  • 5G key semiconductor development: we see tremendous efforts by chipmakers such as Qualcomm and MediaTek to push the 5G phone’s cost down. The integration of baseband and radio-frequency-front-end (RFFE) has the potential to change the market dynamic in the era of 5G.
  • 5G & Edge Computing: to realize the full potential of 5G, cloud vendors and carriers have to work together to bring computing power to the edge of 5G networks. Google Cloud and AT&T announced their partnership recently to provide 5G edge solutions for focused verticals. Microsoft’s acquisition of Affirmed Networks is also a testament to this key trend.
  • 5G & New Software Stack: while data on the edge continues to explode due to 5G, future applications need continuous access to them anywhere in real-time. As such, we expect serverless functions and modern database platform (such as NoSQL database) to proliferate.

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