First Trust launches metaverse thematic ETF

Apr 25th, 2022 | By | Category: Equities

First Trust has launched a new thematic equity ETF in the US targeting firms shaping the development of the metaverse.

Metaverse thematic ETFs

The metaverse is a hypothesized iteration of the internet, supporting persistent online 3-D virtual environments.

The First Trust Indxx Metaverse ETF (ARVR US) has been listed on Nasdaq with an expense ratio of 0.70%.

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.

Ryan Issakainen, Senior Vice President and ETF Strategist at First Trust, said: “Although the metaverse is still in its early stages, we believe this ecosystem offers tremendous opportunity for innovation, including many applications that we don’t fully appreciate today. As a leading provider of thematic ETFs, we are excited to offer ARVR as a way to gain exposure to stocks that may benefit from the growth and maturity of this dynamic investment theme.”

Investment approach

The fund is linked to the Indxx Metaverse Index which selects its constituents from a universe of developed and emerging market stocks with market capitalizations above $1 billion and average daily trading volumes greater than $5 million.

The methodology selects the 50 largest companies that derive at least 50% of their revenue from industries linked to five metaverse-related sub-themes: internet protocols & contents; platforms; payments; optics & display; and semiconductors, hardware, and 5G.

The chosen constituents are initially equally weighted, and the weight of companies with market capitalizations below $10bn is then halved.

The index is rebalanced quarterly and reconstituted semi-annually.

The fund is the fifth metaverse thematic ETF in the US. The largest is the $700m Roundhill Ball Metaverse ETF (META US) which comes with an expense ratio of 0.75%, while the cheapest is the recently launched Fidelity Metaverse ETF (FMET US) which costs just 0.39%.

The other funds are the Fount Metaverse ETF (MVTR US) which has an expense ratio of 0.70%, and the ProShares Metaverse ETF (VERS US), 0.58%.

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