Fischer Gaming, a boutique consulting firm specializing in the global gaming industry, is set to introduce Europe’s first ETF targeting firms in the sports betting and online gambling industries.
Fisher Gaming and HANetf are set to launch Europe’s first ETF targeting the global sports betting and iGaming sector.
The Sports Betting and iGaming UCITS ETF (BETZ LN) will list on London Stock Exchange in June and carry an expense ratio of 0.69%.
The fund is being brought to market in collaboration with London-based white-label ETF platform HANetf.
Explosive growth
According to Fischer Gaming, sports betting and iGaming – online betting activities such as casino games, poker, and fantasy sports – is poised for rapid expansion over the next decade.
The firm points to research from Goldman Sachs that forecasts growth in the US sports betting and iGaming market of approximately 2,300% between 2020 and 2033 to reach $53 billion.
The main catalyst for this growth is expected to be favourable regulatory changes while wider social acceptance of sports betting, technological advances enhancing the online gaming experience, and support from a partner network of sports leagues, teams, and media companies will also serve as tailwinds.
Alongside this rapid industry development, Fischer Gaming believes investors can expect high EBITDA margins, strong free cash flow generation, and a high return on investment.
Aaron Fischer, Founder and CEO of Fischer Gaming, said: “Having witnessed a huge uptick in the take-up of sports betting and iGaming boosted by favourable regulatory changes, we feel that now is the perfect time to launch our Sports Betting and iGaming UCITS ETF. The growth forecasts for this sector are hugely promising, and we are excited to offer European investors the opportunity to gain exposure to this exciting and evolving market.”
Hector McNeil co-Founder and co-CEO at HANetf, commented: “HANetf has consistently been at the forefront of innovation within the European ETF market and the addition of the Sports Betting and iGaming UCITS ETF only adds further credence to that claim. We’re delighted to finally offer the European investor a seat at the Sports Betting and iGaming table, having watched from the sidelines as their North American counterparts have taken advantage of this exciting growth market.”
Index methodology
The ETF will track the Solactive Fischer Sports Betting and iGaming Index which was developed by Fisher Gaming in partnership with Frankfurt-based index operator Solactive.
The index selects its constituents from a universe of developed and emerging market companies (excluding Chinese A-shares) with market capitalizations greater than $100 million and average daily trading volumes above $250,000.
Security selection is driven by ARTIS, Solactive’s proprietary natural language processing algorithm. ARTIS identifies firms linked to a specific theme by screening for related keywords in a company’s publicly available documents.
With reference to the sports betting and iGaming theme, ARTIS identifies companies with business operations related to online gambling platforms, business-to-consumer betting operators and consumer-facing brands, online gambling platform providers, and media firms specializing in streaming betting-related content. The 500 companies with the highest ARTIS thematic relevance scores are selected to form the index universe.
The methodology then screens out companies deriving no revenue from sports betting or iGaming activities as well as firms that derive more than 50% of their revenue from horse racing and lotteries.
The remaining constituents are weighted by float-adjusted market capitalization subject to a cap of 8% on pure-play companies – those that derive more than 50% of their revenue from sports betting and iGaming – and a cap of 5% on all other stocks. Reconstitution and rebalancing occur on a quarterly basis.
According to Fischer Gaming, the index covers a range of larger consumer-facing companies including Caesars Entertainment, DraftKings, Flutter, Entain, MGM Resorts International, and PointsBet, as well as some “picks and shovels” firms, such as Evolution Gaming, IGT, Playtech, and Kambi, which provide other services to the industry but form an important part of the value chain.
The fund’s sponsors will no doubt be hoping the fund emulates the success of the NYSE Arca-listed Roundhill Sports Betting & iGaming ETF (BETZ US). Launched by ETF boutique Roundhill Investments less than a year ago, this fund has amassed more than $450m in assets and delivered a return to investors of bang on 100%.