Fidelity is preparing to launch a strategy in Singapore that will give investors exposure to the “future connectivity theme”.
The firm lodged an application with the Monetary Authority of Singapore (MAS) to roll out the Luxembourg-domiciled Fidelity Funds – Future Connectivity Fund, according to the regulator’s records.
The fund, however, is not new. It was first launched in December 2018 as the Global Communications Fund and was repurposed to the current strategy in mid-October, according to a letter the firm sent to investors at the time. However, Jon Guinness and Sumant Wahi remain to be the co-managers of the new strategy.
“The main characteristics of the fund will be changed, also leading to a new name of the fund,” the letter said. Modifications were expected to be made on 23 November, it noted.
The fund’s investment objectives were changed.
For example, the older Global Communication Fund had a broader mandate, in which it just looks at the global communications services sector as a whole, according to the letter.
Meanwhile, the newer strategy will only invest in stocks that fall under the future connectivity theme.
Co-manager Wahi said in a webcast organised by the firm that the fund will only invest in stocks that have a 40% “thematic purity level”, which is assessed by looking at the company’s future sales and profits on a three-to-five-year basis.
These companies will fall under three buckets, including “enablers”, such as cable and semiconductor manufacturers, “networks”, including mobile providers, telecom tower owners and cable companies, and “innovators”, which are companies providing services like online education, online healthcare, mobility and gaming, co-manager Guinness added during the webcast.
Besides the investment universe, investments in Chinese equities have also been relaxed for the new strategy.
Previously, the fund may invest up to 10% of its assets directly in China A- and B-shares. Now, the fund may invest more than 30% but less than 50% of its net assets directly in China A-shares listed on the Chinext Market, the SME Board or the Star Board, according to the letter.
As of the end of October, the fund had €105m ($125m) in assets, according to its fund factsheet.
The 5G theme
Both managers are optimistic about the theme, especially since future connectivity companies are expected to be beneficiaries of 5G.
“Right now is the start of the 5G cycle. We believe we are in the fast accelerating upward sloping part of the 5G curve, and so that is where we are focused at the moment,” Guinness said.
The opportunity set in the 5G sector alone is huge and is expected to grow to $13.2trn by 2035, driven by the need to upgrade connectivity systems to better process data, Tan Yaw Boon, Hong Kong-based co-manager of Neuberger Berman’s 5G Connectivity Fund, said previously.
“We are consuming a lot more data now, so we need to create a very robust infrastructure, and there’s a lot of money being poured into this area,” Tan said.
Several other wealth and asset managers who are optimistic about 5G include UBS Wealth Management, Gam Investments and JP Morgan Asset Management. CSOP Asset Management also just recently launched a China-focused 5G ETF in Hong Kong.
However, the Fidelity managers noted that while 5G is a huge trend now, their fund is not a 5G-focused product.
“It is not just 5G, as you will be looking at just one aspect of the theme,” Wahi said, noting that some industry experts have already started talking about the future of 6G.
“It’s really about the theme of future connectivity, looking at how [communications evolve over time].”