New Esports ETF Launches With Companies Like Tencent, NVidia And Activision Blizzard
Exchange traded funds (ETFs) have become the darling of many equity traders, with ETFs constantly being created for a variety of different sectors of the economy as the demand presents itself. One of the more recently established ETFs may be of particular interest to those surrounding the business of sports, as it was created with intention to capture the attention of the esports-minded consumer.
The ETF is the VanEck Vectors Video Gaming and Esports ETF (NYSE Arca: ESPO), which offers investors the ability to invest in some of the biggest corporate entities in the esports and video gaming world. The top ten names in the fund make up over 60% of the portfolio weight.
As of September 28, those stocks leading the fund (along with their associated Index weighting) are:
| TENCENT HOLDINGS LTD | 8.09% |
| NVIDIA CORP | 8.07% |
| ACTIVISION BLIZZARD INC | 6.96% |
| NINTENDO CO LTD | 6.46% |
| ELECTRONIC ARTS INC | 5.64% |
| ADVANCED MICRO DEVICES | 5.54% |
| NETEASE INC-ADR | 5.16% |
| TAKE-TWO INTERACTIVE SOFTWRE | 4.97% |
| NEXON CO. LTD | 4.94% |
| NCSOFT CORP ORD | 4.60% |
The fund says that it can be an attractive diversification away from tech giants such as Apple, Google and Microsoft. Operators cite to studies that indicate a rapidly growing competitive video gaming audience that is expected to reach 380 million people globally in 2018, revenue growth averaging over 40% yearly since 2015 and a dynamic, evolving revenue stream.
Further, the fund is excited about the growing number of esports-related mergers and acquisitions such as Tencent’s $632 million investment into Chinese gaming and entertainment live streaming platform Douyu and United Talent Agency’s purchase of esports talent agency Press X as well as esports management company Everday Influencers.
In order for a company to be eligible to be included in the fund’s make-up of equities, it must derive at least 50% of total revenues from video gaming and/or esports. Companies like Microsoft, Sony and Amazon will not be included based on the significant revenues received from outside of those business lines.
The net expense ratio attached to the ETF is $0.55, which is capped contractually until February 1, 2020. The ETF launched on October 17 and had $4.2 million in total net assets as of October 31. There are currently only twenty-five holdings within the fund.
