Bruce Liu manages WUGI, Esoterica’s NextG Economy ETF, which invests in 5G enabled services fuelling the “new digital economy”.
Liu started working at the Dow Chemical Pension Fund, in a role that offered access to industry leaders, freedom and responsibility and therefore gave the investment guru insight into the market. Liu then had a stint at WisdomTree, AllianceBernstein, PhaseCapital, and Liu’s research technique was honed at some of the most prestigious sell-side and brokerage firms around the world.
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It was the entrepreneurial spirit that brought Liu to WUGI: “Money is coming to the individual retail investors, but they are not well served at all.” While peers preferred to focus on the big pension funds, big endowments and big insurance companies, Liu hopes to serve the retail investor. When investing anyone’s money, “the first question I'm gonna ask [is if] I feel comfortable putting my mum's money into it… if you really want to serve retail investors, you have to engage them, give them a product that they can understand.”
A major concern of such investors is the delta on ‘active management’. The image the term itself portrays is one of daily trading to be ‘active’. Liu believes that excessive trading is influenced by improper research. WUGI’s principles are more guided by “active research”. Liu notes that “all my analysts both in the US and China think about what could be the next play or who the winners [are] in this particular industry all the time.”
With that in mind, a key component of WUGI’s investment strategy is looking at 5G solutions and cloud computing. The evolution of the ecosystem surrounding 5G could be drawn out. “To me, it's not only five [or] even 10 years’ process, it’s probably even longer than that,” says Liu. He notes that the segment is creating a change in technology consumption from the roots — “semiconductor” — level to the top — “computing architecture”. 5G will penetrate every aspect from software processing data to various business verticals.
“People like to discuss it like a metaverse, right? You live in a virtual world. So imagine what you could do with AR [augmented reality] or VR [virtual reality]. It requires faster speed, and latency, and tons of data”
Mobile gaming, for instance, would become even bigger than it is today once the infrastructure of 5G is in place. “People like to discuss it like a metaverse, right? You live in a virtual world. So imagine what you could do with AR [augmented reality] or VR [virtual reality]. It requires faster speed, and latency, and tons of data.”
New business and use cases will shape up as penetration and data collection from connected devices increases, forecasts Liu. “I wouldn't be surprised if at the end of the 5G cycle, everything you can imagine in your home, on the street, in your city, on the manufacturing floor, are connected.”
That said, the mobile devices space for 5G is not as exciting. It merely involves the upgradation of instruments from users and not a lot of fresh new spending. “So that's why for the 5G cycle, we’re not that bullish on the phones at all.”
“I wouldn't be surprised if at the end of the 5G cycle, everything you can imagine in your home, on the street, in your city, on the manufacturing floor, are connected”
Liu is looking at the technology from a cycle perspective, adding that “we look at more on the things that are 5G enabled.” That is where this ETF differs from competition like BlueStar Global 5G Communications index that is more focused on companies like Ericsson and Nokia, which focus more on the 5G technology itself.
The volume of data and traffic is pushing development to the edge of cloud computing because keeping it in a central cloud is becoming unwieldy, notes Liu. As a result, services and applications will need to be housed closer to users or at the edge of the cloud.
WUGI’s fund has given 140% returns since inception.
For more insights from Ross Gerber, listen to the episode on Opto Sessions.