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First Trust Hangs Up On Smartphone ETF In Favor Of 5G

March 14, 2019 11:20 am
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First Trust, one of the largest issuers of alternatively-weighted exchange traded funds is hanging up on the First Trust Nasdaq Smartphone Index Fund (NASDAQ:FONE) in favor of tapping into the 5G phenomenon.

What Happened

In a recent filing with the U.S. Securities and Exchange Commission, Illinois-based First Trust said FONE will become the First Trust Indxx NextG ETF. That ETF will track the Indxx 5G & NextG Thematic Index and its new ticker will be “NXTG.”

First Trust's 5G ETF will remain listed on Nasdaq where FONE has traded since coming to market in February 2011.

NXTG's index “is designed to track the performance of companies that have devoted, or have committed to devote, material resources to the research, development and application of fifth generation (“5G”) and next generation digital cellular technologies as they emerge. By utilizing higher frequency radio waves, 5G networks enable significantly increased data rates, reduced latency and high-density connections that were previously unavailable in preceding technological generations,” according to the filing.

Why It's Important

FONE's conversion to the 5G ETF with the ticker NTXG is expected to happen on or around May 29, according to First Trust.

While 5G rollouts recently started happening, First Trust's NTXG isn't the first ETF to tap this investment theme. The Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (NYSE:SRVR), one of this year's best-performing real estate ETFs, provides exposure to telecommunications and technology real estate investment trusts (REITs) with exposure to 5G-related property needs.

Earlier this month, upstart ETF sponsor launched the Defiance Next Gen Connectivity ETF (NYSE:FIVG), the first ETF with a dedicated 5G focus.

What's Next

With over $70 billion in assets under management, First Trust is the sixth-largest U.S. ETF issuer and over the firm's history, it has been able to lure advisors and investors to funds with above-average fees.

Still, NTXG faces significant challenges on the fee front. According to the filing announcing the move to NTXG from FONE, First Trust's new 5G ETF keep FONE's expense ratio of 0.70 percent, or $70 on a $10,000 investment.

That's above the 0.60 percent charged by SRVR and more than double the 0.30 percent expense ratio on the newly minted FIVG.

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