ETC Group has launched the first thematic equity ETF in Europe to target opportunities related to the Metaverse.
Bradley Duke, Founder and co-CEO of ETC Group.
The ETC Group Global Metaverse UCITS ETF has listed on London Stock Exchange in US dollars (Ticker: METR LN) and pound sterling (METP LN) as well as on Xetra (M37R GY) and Borsa Italiana (METR IM) in euros.
The fund has been brought to market in partnership with London-based white-label ETF platform HANetf.
The Metaverse is a term used to describe the concept of a future iteration of the internet, made up of persistent, shared, 3D virtual spaces linked into a perceived virtual universe.
The Metaverse is expected to be richly integrated into the physical world, thereby creating a new medium and economy for work, leisure, and innovation, while transforming long-standing industries and markets such as finance, banking, retail, education, health, and fitness, among many others.
While still in its infancy, the Metaverse has already attracted billions of dollars of investment. Morgan Stanley analysts predict the Metaverse has the potential to generate $8.3 trillion in total consumer expenditure in the US alone, depending on the level of disruption, while Goldman Sachs estimates a potential Metaverse market size globally in excess of $12 trillion.
The ETF seeks to capture opportunities related to the Metaverse investment theme by investing in companies within the fields of virtual & augmented reality, 3D graphics, semiconductors, high-speed wireless communications, online gaming, video streaming, blockchain technologies, cloud computing, and data storage, amongst others.
Bradley Duke, Founder and co-CEO of ETC Group, said: “The Metaverse has been hard for investors to avoid. It has gone from an obscure, theoretical idea to being variously described as everything from the evolution of virtual reality to the next iteration of the internet. Our ETF allows investors to gain exposure to this exciting investment opportunity.”
Hector McNeil, co-CEO and co-Founder of HANetf added: “We are proud to have worked with ETC Group to provide another European market first, this time in the form of a Metaverse ETF. As Europe’s most extensive thematic ETF issuer, this is an exciting fund to add to our roster. Our partnership with ETC Group has had a great track record so far with the launch of the Digital Assets & Blockchain Equity UCITS ETF and some of Europe’s most liquid and most successful physically backed crypto ETCs.”
Methodology
The ETF tracks the Solactive ETC Group Global Metaverse Index which selects its constituents from a universe of developed market stocks with market capitalizations above $1 billion and average daily trading volumes greater than $2 million.
Security selection is driven by Solactive’s proprietary natural language processing algorithm, called ARTIS, which identifies firms linked to a specific theme by screening publicly available information such as financial news, business profiles, and company publications for appropriate keywords.
With reference to the Metaverse theme, the algorithm is programmed to identify companies with business operations linked to the following six industry categories: Augmented & Virtual Reality; Creator Economy; Digital Infrastructure; Digital Marketplace; Gaming; and Digital Payments.
The methodology selects 12 companies from each industry category with the highest ARTIS thematic relevance scores. From this list of 72 stocks, the index selects the 50 constituents with the largest market capitalizations.
Constituents are initially equally weighted, while the weights of stocks from the Augmented/Virtual Reality industry category are multiplied by a factor of three. The index is rebalanced on a quarterly basis with buffer rules helping to limit unnecessary turnover.
As of 11 March, more than three-quarters (79.3%) of the index was allocated to US-listed stocks with the next-largest country exposures being Japan (8.2%) and the UK (4.2%).
Notable stock positions included Apple (7.3%), PTC (6.1%), S4 Capital (4.2%), Snap (4.0%), and Meta Platforms (3.9%).
The ETF comes with an expense ratio of 0.65%.
While first to market, METR already has competition hot on its heels. New York-based investment adviser Roundhill Investments has announced it will introduce a Metaverse thematic ETF on Xetra later this month. The Roundhill Ball Metaverse UCITS ETF (METV GY) will track the Ball Metaverse Index and will come with an expense ratio of 0.59%.