ETF newcomer Esoterica Is listing a new actively managed 5G ETF. The Esoterica NextG Economy ETF (WUGI) will invest in companies whose “fortunes are significantly tied” to 5G. 5G is the new wave of faster internet technology (to simplify enormously).
WUGI has a broad net and can invest in many different kinds of company. Potential investments include computer games makers to smartphone companies to ecommerce businesses. It will use both bottom up and top-down analyses to pick stocks.
This exchange traded fund will charge a 0.98% fee. The fee will be made to look lower by one of those “temporary fee waivers” that are becoming industry standard for new issuances.
Analysis – there’s better alternatives
The way clever new tech ETFs have always worked is that someone – usually a small newcomer to the ETF industry – takes a risk on an idea and proves it can work (can perform and collect assets). Then other ETF providers come along and copy them and takes market share from them. ROBO did it with robotics ETFs; they were then copied by Global X and BlackRock. GAMR did it with video games, which was later copied by Van Eck and others. And Defiance did it with 5G – which was copied by First Trust.
|Ticker||Fund Name||Assets under management||Management Fee|
|FIVG||Defiance Next Gen Connectivity ETF||212||0.3|
|NXTG||First Trust Indxx NextG ETF||277||0.7|
Copying occurs in every industry, and it can be a good thing, as it can provide cheaper better forms of current products. This is what happens with drugs all the time. We’ve seen it for the better with some ETFs too.
But in the case of today’s ETF it’s hard to see how this kind of copycat product is an improvement on existing funds. The fee is much higher. The investment strategy is not more refined. There’s no track record of outperformance. My instinct is that this ETF will struggle. However if it performs well then a 5G ETF could still do well.