Power up your portfolio with an Esports ETF
One of the biggest investment challenges in the esports and gaming industry is that some of the best properties are not directly investable.
Twitch, for example, the leading gaming streaming site is owned by Amazon. Recently valued at $3.8 billion, it barely moves the needle for Amazon with a $870 billion + market cap. When it comes to some of the top games, we face the same problem. League of Legends, for example, is published by Riot Games, a fully owned subsidiary of Tencent Holdings. All of their game revenue globally accounts for only 28.5% of total revenue, making actual exposure to League of Legends negligible.
Recently there’s another way to get more direct exposure to the whole industry and that’s through esports and gaming ETFs. While they are still heavily weighted in larger caps that aren’t pure plays, they do offer a more diversified solution
Evolve Funds Group Inc. (TSX: HERO)
HERO, Canada’s first Esports ETF, was introduced on June 17, 2019 and tracks the Solactive eGaming Index. The ETF has a global and domestic reach as it focuses on three large gaming regions, Japan (32.25%), United States (29.86%), and China (13.46%). With over CAD$2 million in assets, HERO has 49 different holdings directly/indirectly related to the esports business. As HERO’s focus is on esports software, its top three holdings by weight, NetEase (10.12%), EA (10.03%) and Activision (9.97%) reflect that virtue. HERO also offers its shareholders quarterly dividends of CAD$0.015, an annual yield of about 0.29%.
Roundhill Investments (NYSE: NERD)
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NERD, an ETF with an inception date of June 4th, 2019, is comprised of 25 holdings that try to track the performance of the Roundhill BITKRAFT Esports Index (NERD Index). The NERD index focuses on globally listed developers/publishers, media, hardware companies with exposure to the Esports industry.
Therefore, its top three holdings include Turtle Beach (hardware), AfreecaTV (media streaming) and Activision (publisher/developer) with weights of 6.95%, 6.54% and 6.19%, respectively. The fund has over USD$9 million in assets under management.
ETFMG Video Game Tech (NYSE: GAMR)
GAMR launched March 8th, 2016, was the first video gaming ETF ever created. The ETF tracks an equity index that focuses on firms that support or use video gaming and video game technologies. GAMR has USD$81 million assets under management split over 85 holdings. The top three holdings are Square-Enix (3.50%), Capcom (3.17%) and Activision (3.01%). Though the top three holdings do not show much diversification in the gaming industry, the ETF also holds MSI (2.98% of total weight), a computer hardware company and Gamestop (2.86%) a video game retail company. GAMR also provides quarterly dividends of USD$0.13, representing a gross annual yield of about 1.25%.
VanEck Vectors Video Gaming and eSports (NYSE: ESPO)
ESPO is an ETF that was created on November 16th, 2018 and tries to track the MVIS Global Video Gaming and Esports Index (MVESPOTR). The index tracks the performance of firms with exposure in video game development, hardware and software. ESPO has 25 holdings worth USD$38.8 million, with the top three being NVIDIA (8.63%), Tencent (7.52%) and Activision (7.12%). ESPO also holds AMD (6.44%) a CPU developer with a large focus on gaming with its Ryzen product line at the fourth spot.
ETF YTD and 3 Month Returns
Same Same but Different?
HERO provides direct exposure to a globally growing industry to Canadian investors. For Canadian investors, it will mitigate some of the currency risks.
NERD provides investors with direct exposure to pure play gaming hardware companies. In fact, not only is the largest holding a hardware company, about 24% of the entire portfolio weight is invested in hardware companies like MSI, ASUS and Turtle Beach.
GAMR perhaps might be the most diversified out of the four. With 87 holdings, the weights are much more evenly distributed throughout the plethora of firms. Lastly, ESPO with over 75% of equity in large cap firms, provides investors exposure to some of the largest gaming companies in the world.
To make things more complicated, this is really just the beginning. As the esports and gaming industry starts to mature, there’s no doubt we will see more options giving investors more chance and the ability to better target their investment.
Ben Feferman is an esports analyst and CEO of Amuka Esports. Since the age of 5, Ben has been an avid gamer and has fused ... <Read more about Ben Feferman>