Roundhill Investments debuts with Esports ETF

Jun 4th, 2019 | By | Category: Equities

Industry debutant Roundhill Investments has launched its first ETF, the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD US) on NYSE Arca.

Roundhill debuts thematic Esports ETF

The fund provides exposure to pure-play, core, and non-core companies involved in the Esports industry.

The fund provides thematic exposure to companies linked to the Esports industry (organized, multiplayer video game competitions between professional players with real money prizes).

According to Esports research firm Newzoo, the global video game industry totalled $138 billion in 2018, with more than 2.3 billion gamers worldwide.

Technological advances in streaming have transformed gaming into spectator sports, and with more than 450 million viewers worldwide, Esports is seen as the driving force behind future growth in the video game industry.

The ETF tracks the Roundhill BITKRAFT Esports Index, developed by Esports-focused investment company BITKRAFT Esports Ventures.

Jens Hilgers, Founding Partner of BITKRAFT Esports Ventures, said, “Together with the Roundhill team we are taking an important step forward in making Esports more easily accessible on the public financial markets.

“The Roundhill BITKRAFT Esports and Digital Entertainment ETF enables institutional investors as well as individuals to participate in the long-term growth of Esports and the underlying entertainment trends. Essentially, this ETF enables Esports fans to invest in the field they love and believe in.”

The index consists of both developed and emerging market stocks, excluding China A-shares. To be eligible for inclusion in the index, a firm must have a minimum market capitalization of $100 million and average daily traded value of at least $1m.

A screening methodology identifies Esports companies through keyword searches of regulatory filings, analyst reports, and other publicly available sources and classifies them as either pure-play, core, or non-core. Types of firms that pass through the screening phase include video game publishers, streaming network operators, video game tournament and league operators, competitive team owners, and hardware companies.

The index will consist of a minimum of 25 stocks at each rebalancing, and the number of pure-play and core companies will determine the maximum number of securities allowed within the index.

Stocks are equally weighted within their classification with pure-play companies collectively assigned 150% of the initial weight of core companies which are assigned 150% of the weight of non-core companies. Index reconstitution and rebalancing occur quarterly.

Stocks from the US account for one-fifth (20.9%) of the total index weight followed by China (16.0%), South Korea (13.2%), Japan (12.0%), and Singapore (9.7%). Approximately half the index weight is dedicated to large-caps (greater than $5bn market cap) with the remaining exposure equally distributed between mid- and small-caps.

There are currently 25 constituents in the index, the largest being AfreecaTV (8.0%), Sea (7.5%), Activision Blizzard (6.1%), and Modern Times (5.6%).

The fund comes with an expense ratio of 0.25% due to a contractual fee waiver in place for the first year of the ETF’s life. Its expense ratio after 30 June 2020 will be 0.50%.

The only other Esports ETF on the market at the moment 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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