Worldwide, countries are looking to leverage 5G effectively and innovatively, in order to boost innovations and growth. Rising demand from population growth and increased mobile penetrationand capacity are among the most prominent reasons for advancing towards fifth-generation mobile networks. In addition, the impact of the coronavirus pandemic has also fueled the demand for more 5G spectrum bands.
An unstoppable 5G race has begun globally, with accelerated strategic investment in 5G, which is in the early stages of a multi-phase development. The next breed of businesses and startups are set to capitalise on the opportunities brought about by 5G technology, that may prove to be a game-changer.
Investors can benefit from the evolving 5G landscape by focusing on its enablers and beneficiaries, across a range of sectors and value chains.
Asia’s fertile ground for 5G
Like the rest of the world, Asian countries are looking to derive benefit from the development and enhancement of 5G connectivity. Amid rising smartphone usage, 5G rollout continues to ramp up in Asia. China, as an established 5G market leader, still leads the way in terms of the number of people using 5G networks. Meanwhile, South Korea and Japan are also emerging as “pioneer markets” from the region when it comes to the 5G uptake.
As per the tally of 5G leaders across the region by the Economist Intelligence Unit, South Korea, China, Taiwan, Japan and Singapore comprise the top five, respectively. According to the researchers, regulators in Japan, Taiwan, Australia and South Korea have encouraged companies to improve network speeds, coverage and an increase in use cases for the enterprise sector. Researchers found that government financial support was crucial in helping to support network expansion and facilitating trials for industrial applications.
These countries in the Asian region are not only ahead in launching the 5G network, but are also home to some of the most compelling disruptive thematic opportunities and 5G innovations.
Besides 5G, the region with densely populated cities and large, rural expanses has become an epicentre of many disruptive technology innovations and leads in areas like advanced semiconductor manufacturing, robotics, fintech, and digital lifestyle. According to Credit Suisse, 5G, iPhone evolution and positive EV trends are the growth drivers for the Asian technology sector. The accelerating roll-out of 5G across the region is set to have a drastic impact on businesses, as these nations prepare their organisations for the transformative potential of 5G technology.
Neuberger Berman InnovAsia 5G Fund
The acceleration of 5G in Asia opens up attractive investment opportunities. “Asia is emerging as the new Silicon Valley. Spearheading technology innovation and adoption, this fast-growing region is no longer just a low-cost manufacturing base. By 2025, Asia will dominate 70% of 5G connections globally”, says Yan Taw (YT) Boon, Director of Research, Asia, at Neuberger Berman.
In line with this trend, Neuberger Berman launched the InnovAsia 5G Fund (IE000J2D2XC9) in July 2021. The thematic fund is invested in innovative technologies and business models in the early stages of development from the region. IPOs are also closely watched for consideration.
The all-cap thematic equity strategy focusses on companies with a market penetration of less than 20%, with high innovation potential in key investment themes like 5G network infrastructure, internet of things (IoT), digital lifestyle trends and industrial innovations.
The fund is actively managed and is not constrained by the benchmark. The MSCI All-Country World Index (ACWI) is used for performance comparison purposes only. The strategy consists of 30-60 stocks which are picked based on in-depth fundamental research and thematic relevance while also taking environmental, social and governance (ESG) factors into account.
The Ireland-domiciled fund with Asset under Management (AUM) of $17.65 m has a running charge of 1.05% and management fee of 0.85%. The asset allocation of the 5G fund comprises 38.05% in top 10 holdings and another 5.21% in cash equivalents.
In terms of regional allocations, the portfolio is highly invested in Taiwan, Japan, Korea and Singapore with 21.73%, 20.76%, 17.02% and 9.43%, respectively. The United States and the Netherlands are also part of the portfolio, representing 4.16% and 3.95%. Meanwhile, other Asian countries allocations are China (3.66%), Thailand (3.49%), Indonesia (2.77%) and India (2.20%).
The 5G fund has the heaviest exposure in the information technology sector, which comprises 67.94% of fund allocation. Other top market sectors include communication services (12.73%), health care (5.43%), consumer discretionary (3.61%), industrials (3.49%) and materials (1.58%).
Top 3 holdings of the mutual fund are South Korean Internet company KaKao (4.26%), Taiwanese fabless semiconductor company MediaTek (4.08%) and South Korean entertainment company HYBE (4.03%). They are followed by Japanese company Sysmex Corporation (3.97%), Singapore’s Sea (3.94%), AEM Holdings (3.91%), Taiwan’s Accton Technology (3.53%), US-based Fabrinet (3.49%), Japan’s FUJI Corporation (3.49%) and Taiwan’s Gudeng Precision Industrial (3.36%).
The portfolio is managed by former chip designer and Neuberger Berman’s Director of Research, Asia, YT Boon (Hong Kong), and CIO, Research Funds, Hari Ramanan (New York). They have a combined industry experience of over 30 years. The duo is further supported by a team of research analysts with local insights into Asian innovation ecosystems based in China, Hong Kong, Taiwan and Japan.
InnovAsia is the second 5G fund launched by Neuberger Berman. The fund managers Boon and Ramanan also manage the Neuberger Berman 5G Connectivity Fund, which comprises a portfolio of global equity holdings, focusing on companies that are involved or derive benefit from Next Generation Connectivity.
* as of 31 August 2021