How institutional investors can capture the return potential of 5G tech

The advent of fifth generation cellular technology, 5G for short, has significant implications for institutional investors with patient capital.

Many innovative sectors have the capacity to leap forward as this network technology becomes more widely used, including self-driving cars, video games, health care and cybersecurity, says Raj Lala, president and chief executive officer of Evolve ETFs.

“When 5G started to poke its head through, we fully recognized how important it was going to be in so many of these different areas,” he says.

Read: Is cyber security the next big growth industry?

There are an estimated 20 to 30 billion devices connected to the internet at any given time — not just smartphones and computers, but thermostats, watches and many other new points of connection, says Lala. With functioning 5G expected to reach Canada by 2020, people are going to notice a major difference right away.

“This increase in connectivity is great because it makes our lives more efficient and more productive,” he says. “5G becomes more important for allowing seamless connection for all of those areas in our lives being disrupted over the course of the next 15 years.”

Self-driving cars, for example, are an emerging technology that requires the fastest possible network connection to function safely. As the groundwork is laid for 5G, using autonomous vehicles will be more viable, says Lala. “[With] self-driving cars, when they eventually make their way to our roads, you can’t afford any downtime, you can’t afford any latency in the decision-making process. It needs to be that fast.”

The network will also lead to the enhancement of the luxury video game market. Today, gaming companies earn revenue very differently than they did 10 years ago, says Lala. Games such as Fortnite are uploaded to the internet for free and players pay to upgrade their weapons and characters throughout gameplay.

Read: Are eSports the next growth sector for institutional investments?

Tournaments set up by the companies are turning these types of games into virtual sports. “You can imagine the upload speed to play these games online,” says Lala. “5G is going to be critical in the ability to make sure there is no latency. And also 5G is going to be critical from [an] upload perspective of the best possible graphics. The graphics have come a long way.”

The health-care sector also stands to benefit from the technology, specifically with the increased capacity to use surgical robotics, he says. “We are going to be seeing, in the next five to 10 years, robots start to perform a certain amount of surgery on our bodies without having to have that nine-month wait for a doctor to see you.”

The speed at which robots can react and process data by using 5G will be critical to their integration into the health-care system, says Lala.

Read: Technology companies and integration with ESG a concern for investors

For long-term investors, directly capturing the theme of 5G means focusing on companies laying down the infrastructure for the network, he says. Currently, as they set up the infrastructure, these companies aren’t actually generating any revenue from 5G, but that will change once the system is implemented on a wide scale and other companies start to subscribe to use the network.

Subsequently, the companies making the devices that will use the network also stand to benefit. For example, smartphones, which currently use 4G or LTE technology, may not function properly on a 5G network, prompting consumers to replace them, says Lala. “A lot of this is about anticipation at the moment.”