VanEck has launched the VanEck Vectors Video Gaming and eSports UCITS ETF in Europe.
The fund provides exposure to companies closely related to the theme of video gaming and eSports.
The fund provides exposure to a global equity portfolio of companies operating in the video gaming and eSports industries.
It is available to trade on the London Stock Exchange in US dollars (ESPO LN) and pound sterling (ESGB LN), and on Deutsche Börse in euros (VE4R GR).
VanEck launched a US version of the fund on NYSE Arca in October last year.
Investment proposition
Research from Newzoo, a market intelligence company focused on the video game industry, shows that global revenue in the sector is expected to reach $150 billion in 2019, 10% higher than the previous year.
A key driver of this growth is the rise of eSports (organized, multiplayer competitions with real money prizes). eSports has recorded annual revenue growth of around 40% over the past four years, and the number of viewers expected to watch eSports globally is predicted to top 450 million in 2019.
“Just a few years ago, the success story of sold-out stadiums, millions of viewers, high-caliber sponsors, and notable marketing activities was centered around football, baseball, basketball, and hockey. But today, it is just as focused upon the world of video gaming and eSports,” said Ed Lopez, Head of ETF Product at VanEck.
“Esports has brought video gaming out of the living room and into the stadiums,” continues Lopez. “The average consumers in the esports segment are below 30 years of age and are therefore very young compared with the viewers of traditional forms of sport. Esports are becoming increasingly popular and both the technology as well as the games and events are developing in harmony with the consumers’ needs. By investing in companies in this segment, investors can take part in this long-term growth story.”
Strong growth figures in the industry has led video gaming and eSports to be a popular theme with ETF product developers recently. There are currently three funds in the US targeting this sector, while Canada got its first video gaming and eSports ETF just last week.
VanEck is the first ETF issuer to bring the strategy to Europe however, gaining first-mover advantage in this sizable market.
Index methodology
The ETF obtains its exposure by tracking the MVIS Global Video Gaming and eSports Index which was created by MV Index Solutions, VanEck’s indexing division. The index consists of companies from both developed and emerging markets with a market capitalization of at least $150 million and three-month average daily trading volume of at least $1m.
To home in on the theme, the index methodology excludes any firm with less than a 50% revenue exposure to video gaming and eSports. Eligible companies include those that develop video games and related software/hardware, streaming services, and are involved in eSports events.
Once in the index, a constituent can see its proportion of revenue derived from the video gaming and eSports sector fall below 50% and remain in the index so long as the proportion stays above 25%.
The index is weighted by free float market capitalisation with a single issuer cap of 8%. Reconstitution and rebalancing occurs on a quarterly schedule.
Roughly a third (34.6%) of the index is presently allocated to stocks from the US, followed by Japan (23.8%), China (13.6%), South Korea (11.3%) and Thailand (6.6%).
The index is predominantly focussed on stocks in the communication services sector, at 78.4% of the total index weight, followed by information technology stocks which make up 17.0%.
While the methodology excludes some major US-based players in the eSports industry – such as Microsoft and Amazon – due to its high revenue exposure threshold for index inclusion, the constituent list includes most of the well-known names in the space: namely, Nintendo (6.8%), Tencent Holdings (6.6%), Sea (6.6%), Nvidia (6.5%), Activision Blizzard (6.5%), Advanced Micro Devices (6.2%), and Electronic Arts (5.8%).
The fund comes with an expense ratio of 0.55%. Income is accumulated an reinvested in the portfolio.