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Dial Up 5G With This ETF

August 24, 2018 11:09 am
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Technology and telecommunications companies are preparing for the launch of 5G, the next generation of mobile communications networks.

Plenty of exchange traded funds offer exposure to the technology side of the 5G rollout, but there is another way to play 5G: with real estate investment trusts.

What Happened

The Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (NYSE:SRVR) debuted in May as a part of a broader suite of focused real estate ETFs from Pacer. SRVR tracks the Benchmark Data & Infrastructure Real Estate SCTR Index.

That benchmark screens companies based property classification, tenant type and revenue type, according to Pacer.

“In the U.S., AT&T and Verizon have plans to launch 5G this year. Verizon is planning to deploy 5G fixed wireless service in Sacramento, Los Angeles, Houston and Indianapolis by the end of this year,” reports RCR Wireless News.

Why It's Important

SRVR features exposure to six real estate industry groups, but the fund allocates about 75 percent of its combined weight to general and cell tower REITs and data center REITs. Those exposures are well above-average relative to traditional real estate ETFs. For example, the Vanguard Real Estate ETF (NYSE:VNQ), the largest real estate ETF by assets, is more heavily allocated to specialized, retail and residential REITs.

Three stocks — Equinix, Inc. (NASDAQ:EQIX), American Tower Corp. (NYSE:AMT) and Crown Castle International Corp. (NYSE:CCI) — combine for over 45 percent of SRVR's roster.

SRVR's 27 components are mostly focused on the domestic market, which is a relevant point because North America is expected to be the leader in 5G rollouts. Europe is not expected to widely launch 5G until 2021.

What's Next

In addition to 5G, other catalysts for data center REITs, including some SRVR holdings, include the cloud computing and cybersecurity booms, which require additional space to house new servers and related gear.

SRVR charges 0.60 percent per year, or $60 on a $10,000 investment.

Disclosure: The author owns share of VNQ.

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