Defiance repurposes VR ETF to target video game industry

Jun 12th, 2019 | By | Category: Equities

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Defiance ETFs is changing the underlying index on its debut fund, the Defiance Future Tech ETF (AUGR US), redirecting the fund’s exposure towards firms linked to the video games industry.

Defiance Video Game VR ETF

The new index tracks firms that develop or publish video games and internet-based games as well as manufacturers of video game consoles and related electronics.

Effective 24 June 2019, the ETF will switch from the BlueStar Augmented and Virtual Reality Index and will begin tracking the Bluestar Next Gen Video Gaming Index.

The current index is designed to capture global opportunities within the realm of augmented reality and virtual reality technology.

While this does include companies developing AR/VR technologies for gaming systems and video games, the index also covers AR/VR firms with operations in six other categories: artificial intelligence, including machine vision and natural language processing; graphic processing units; cloud computing infrastructure; simultaneous localization and mapping; displays including holographic and adaptive interfaces; and sensors for depth perception and positioning.

The new index consists of global equities of companies that develop or publish video games and internet-based games, and manufacturers of video game consoles and related electronics. The index is rebalanced semi-annually and components are weighted by market capitalization.

Paul Dellaquila, Global Head of ETFs at Defiance, commented, “Augmented and virtual reality is a disruptive technology that we continue to believe in, but we feel investors will be better served by a fund that focuses on one of the key areas where this technology may have significant current impacts, which is why we’re magnifying the focus of the fund to hone in on the video game space.”

To reflect the change in objective, the fund will be renamed the Defiance Next Gen Video Gaming ETF (VIDG US). It will remain listed on NYSE Arca but will see its expense ratio lowered from 0.40% to 0.30%.

The AR/VR fund is nearly a year old and has yet to garner significant interest from investors, a factor that has likely influenced Defiance’s decision to repurpose the ETF.

The video game theme has been a popular choice for product development recently with two other ETFs covering this space having been launched over the past year. These are the VanEck Vectors Video Gaming and eSports ETF (ESPO US), which comes with an expense ratio of 0.55%, and the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD US), which currently costs 0.25% due to a fee waiver that, if allowed to expire, would see the fund’s expense ratio rise to 0.50% in July 2020.

By pricing the ETF at the lower end of the spectrum for this category, Defiance has positioned the fund as a compelling option for investors wishing to gain access to this rapidly developing theme.

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