ProShares launches Metaverse thematic ETF

Mar 22nd, 2022 | By | Category: Equities

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ProShares has expanded its range of thematic equity ETFs with the launch of a US equity fund targeting firms shaping the development of the Metaverse.

Proshares Metaverse thematic etf

The Metaverse will create a new medium and economy for work, leisure, and innovation.

The ProShares Metaverse ETF (VERS US) has been listed on NYSE Arca with an expense ratio of 0.58%.

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.

Commenting on the launch, Michael L. Sapir, Founder and CEO of ProShares, said: “The Metaverse may be as impactful on society as the arrival of the internet or the mobile phone, and the investment opportunity has the potential to be just as compelling. VERS provides investors with a diversified basket of innovative companies that are positioned to potentially benefit from the Metaverse’s rapid rise.”

Scott Helfstein, Executive Director, Thematic Investing at ProShares, added: “The Metaverse has the potential to revolutionize a range of industries. In the not-too-distant future, anything from a work meeting to time with family could take place in the Metaverse, and VERS provides investors an easy way to access the potential growth.”

Methodology

The ETF is linked to the Solactive Metaverse Theme Index which selects its constituents from a universe of stocks that are listed on the NYSE or Nasdaq Stock Market and that have market capitalizations above $100 million and average daily trading volumes greater than $1m.

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 five segments: ‘Technology’, comprising providers of related infrastructure and hardware such as semiconductors; ‘Platforms’, developers of virtual environments wherein users and businesses can interact; ‘Devices’, providers of wearable devices used for interacting in virtual and augmented reality; ‘Standards’, developers of tools and services that facilitate the creation of the Metaverse by setting standards for interoperability; and ‘Data processing’, providers of computing power to support the Metaverse.

Companies identified by the above step are then screened to ensure they derive at least 50% of their revenue from Metaverse-related business activities.

The remaining pool of securities is ranked according to their ARTIS thematic relevance scores and the top 40 stocks are selected for index inclusion. Constituents are weighted using a combination of float-adjusted market capitalization and thematic rank.

The index is rebalanced on a semi-annual basis with buffer rules helping to limit unnecessary turnover.

As of 10 March, media & entertainment and semiconductor companies accounted for the largest weights at 31.7% and 25.0%, respectively, with the next-largest industry exposures being software & services (17.8%), technology hardware & equipment (12.2%), and retailing (5.2%).

Notable positions included Apple (8.1%), Nvidia (6.5%), Meta Platforms (6.4%), Alphabet (6.2%), and Microsoft (6.2%).

The fund is the third Metaverse thematic ETF in the US. The $670m Roundhill Ball Metaverse ETF (META US), which launched in July 2021, tracks the Ball Metaverse Index and comes with an expense ratio of 0.75%. The Fount Metaverse ETF (MVTR US), which was rolled out in November 2021, is linked to the Fount Metaverse Index and costs 0.70%. Both ETFs invest globally while targeting firms related to the Metaverse.

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