VanEck’s gaming & eSports ETF wins big in debut season

Aug 19th, 2020 | By | Category: Equities

The VanEck Vectors Video Gaming and eSports UCITS ETF has eased past $500 million in assets under management, just weeks after celebrating its first anniversary.

VanEck’s gaming & eSports ETF wins big in debut season

VanEck’s video gaming and eSports ETF (ESPO) has performed well in its fledgling year.

Since its listing on the London Stock Exchange in late June 2019, the ETF has benefited from a thriving video games market and an eSports industry that is reaching fever pitch.

“We are very satisfied with the performance of our Video Gaming and eSports ETF,” said Martijn Rozemuller, Head of Europe at VanEck.

“Bucking the trend, the ETF was able to withstand the strong, general price falls in spring. As a result, Video Gaming and eSports ETF’s fund volume had already reached the 100-million-euros ($119m) mark in April 2020, ten months after it was launched.”

Fund assets now stand at more than $500 million, courtesy of an additional $270m of inflows and continued stonking market performance. Year to date, the fund is up 58%.

Rozemuller added, “We have seen strong growth in the video and eSports industry, particularly during the – still ongoing – coronavirus pandemic as people around the world compete and make digital contacts through video games due to a lack of personal contact and sports opportunities.

“This development has given the entire industry a boost and made it more widely accepted, which will give it further potential after the crisis ends.”

eSports no longer niche

One sign of eSports’ increasing acceptance was the virtual version of the 24 Hours of Le Mans race in June 2020, held after the actual one on the legendary track in France was postponed due to the pandemic.

Big names in real-life motorsport, such as Max Verstappen, Fernando Alonso and Rubens Barrichello, took part in the race with almost 200 other drivers, watched by more than 14 million people in live streams and on TV stations worldwide.

Trends in the industry before the coronavirus crisis show that the growing interest in the video games market and eSports events is not only due to current social distancing restrictions.

“Even before the coronavirus crisis, the eSports segment had been posting average annual sales growth of 28 percent since 2015,” noted Rozemuller.

“Even when the coronavirus crisis becomes history at some point, the industry will be more accepted after the crisis and therefore have further potential for growth.”

The fund

The fund is linked to the MVIS Global Video Gaming & eSports Index, a global index that tracks the performance of the global video gaming and eSports segment.

The index is composed of companies with at least 50% (25% for current components) of their revenues deriving from video gaming and/or eSports activities.

Eligible companies include those that develop video games and related software or hardware such as computer processors and graphics cards used in video gaming systems and related hardware such as controllers, headsets, and video gaming consoles.

Companies may also include those that offer streaming services, develop video games and/or hardware for use in eSports events, or are involved in eSports events such as league operators, teams, distributors, and platforms.

Companies must have a market capitalization in excess of $150m, a three-month average daily turnover greater than $1m, and a minimum trading volume of 250,000 shares each month over the last six months.

The index represents at least 90% of the free-float market capitalization of the investable video gaming and eSports universe with a minimum of 25 companies. Companies are weighted by free-float market capitalization, subject to a maximum weight of 8% for single stock to ensure diversification.

If a stock exceeds this maximum weight, then the weight will be reduced to the maximum weight and the excess weight is redistributed proportionally across all other index constituents – a process that is repeated until no stocks have weights exceeding the respective maximum weight.

The composition of the index is reviewed on a quarterly basis.

There are currently 25 constituents. Major positions include Tencent (8.44%), Advanced Micro Devices (8.39%), Nvidia (7.98%), Nintendo (6.09%), Activision Blizzard (5.84%), Electronic Arts (5.37%), Sea (5.25%), Netease (4.67%), Zynga (4.62%), and Bilibili (4.61%).

Companies from the United States provide the largest contribution, with 36.8%, followed by Japan (20.1%), China (19.8%), Taiwan (7.6%), and South Korea (6.5%). The largest sector weights are communication services (75.8%), information technology (20.5%), and consumer discretionary (3.7%).

The fund is fully physically replicating and has a total expense ratio of 0.55%.

A US-domiciled version of the fund – the VanEck Vectors Video Gaming and eSports ETF (ESPO) – is available on Nasdaq. It is slightly smaller than the European fund, in part because of the existence of competing plays on the video gaming and eSports themes, with $436m in assets under management. The fee is the same.

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