Evolve Funds launches Canada’s first eGaming and eSports ETF

Jun 17th, 2019 | By | Category: Equities

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Evolve Funds Group has launched a new ETF – the Evolve E-Gaming Index ETF (HERO CN) – on the Toronto Stock Exchange.

Raj Lala, President and CEO of Evolve ETFs

Raj Lala, president and CEO of Evolve ETFs.

The fund is Canada’s first ETF to provide pure-play thematic exposure to firms listed globally operating in the eGaming and eSports industries.

eGaming is a generic term for video games, desktop computer games, or online games with one or more players.

eSports refers to organized, multiplayer eGaming competitions with real money prizes.

The ETF tracks the Solactive eGaming Index which selects its constituents from a universe of developed market stocks with market capitalizations greater than CAD$100 million and average daily traded values over the past three months of at least CAD$2 million.

Index provider Solactive uses the FactSet Revere Business Industry Classification System (RBICS) to identify firms operating in relevant subindustries. These include companies making gaming electronics as well as eGaming software providers that cater for online website games, handheld and smartphone games, and console games.

The index is weighted by market capitalization subject to a 10% cap per stock. Reconstitution and rebalancing occur quarterly.

The index currently consists of just 20 constituents with half the total index weight allocated to stocks from Japan and a further one-third to stocks from the US.

Raj Lala, President, and CEO of Evolve ETFs, commented, “The launch of HERO marks an opportunity for Canadian investors to participate in another innovative sector positioned for exponential global growth.

“The momentum behind eGaming signifies a cultural shift in entertainment with 2.2 billion gamers globally. Additionally, almost 500 million people are expected to watch eGaming events, leading to supplemental revenue sources for the industry from areas such as media rights and sponsorships. This year, the industry is forecasted for growth upwards of 38%.”

Timo Pfeiffer, Head of Research at Solactive, added, “The development of the Solactive eGaming Index displays Solactive’s aspiration to be on the front line of trends. We strive to find for our clients an added value that they can pass on to their consumers. We are happy to collaborate with Evolve ETFs, as they recognized the potential of this increasingly growing market, making it possible for investors to participate in that evolution.”

“The launch of Canada’s first eSports ETF further validates the size and longevity of the gaming industry,” noted Menashe Kestenbaum, Founder, and CEO of Enthusiast Gaming, a Canadian digital media company specializing in video game journalism. “We look forward to the launch of HERO and taking part in the continued growth and success of the gaming industry.”

The ETF comes with a management fee of 0.70%. It trades in Canadian dollars but hedges its foreign currency exposure. Distributions are made to investors on a quarterly basis.

There are already a couple of ETFs listed in the US that provide exposure to the eSports theme. Just last week, industry debutant Roundhill Investments launched its first ETF, the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD US), on NYSE Arca. The fund covers both developed and emerging market eSports firms through tracking the Roundhill BITKRAFT Esports Index. Its expense ratio is 0.25%.

The other eSports ETF on the market is the VanEck Vectors Video Gaming and eSports ETF (ESPO US) which launched on NYSE Arca in October 2018. This fund has approximately $25m in AUM and comes with an expense ratio of 0.55%.

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