US investment advisory creates new ETF for esports
Esports investor venture fund Bitkraft Esports Ventures, Roundhill Investments, a New York-based registered investment advisor, recently co-launched a new ETF on the NYSE to enable more traders to tap into the global esports industry.
The Roundhill Bitkraft Esports and Digital Entertainment ETF (listed as NERD) began trading publicly last week. The ETF tracks publishers in the video games field, hardware companies that have established themselves as major players and streaming network operators who specialize in esports.
The research firm Newzoo has predicted that the electronic sports industry as a whole will be worth over US$1 billion in annual revenue by the end of 2019.
According to Esports Observer, investments in digital esports exceeded US$4 billion in disclosed funding last year, and many investors have looked to cash in on the growth in popularity of online gaming.
Associated streaming channels have allowed popular players to garner millions of followers, and given rise to an entire sub-sector of the PC market that sells specialist products targeted toward an army of avid gamers around the world.
Bitkraft is one such early stage investor and company builder focused entirely on the esports and digital entertainment sector, with offices in LA and Berlin.
Roundhill Investments founder Will Hershey explained: “We [define esports as] the business of competitive gaming in front of a viewing audience, that includes anything from watching [a streamer] all the way up to big events like the Intel Extreme Masters and everything in between.”
“We’re really trying to identify the secular trends that dominate gaming today, such as multiplayer games and people streaming and watching one another, to isolate them,” he said.
Bitkraft and Roundhill used that definition to select the twenty-five stocks in the fund, which is mostly made of game and app publishers such as Take-Two and Activision Blizzard. However, it also features some hardware-related players such as chipmaker Nvidia, which has been involved in esports since its rise over a decade ago.
Most the stocks in the ETF are companies from the Asia-Pacific region, many of which have a wider footing in the esports space as a whole. For example, AfreecaTV, a South Korean video streaming service known for showing and sponsoring esports teams, events and league, is the largest holding in NERD.
Other components include Sea Ltd. from Singapore, a games publisher and owner of a mobile gaming platform, and Modern Times Group, a digital entertainment company based in Sweden.
The Asia-heavy regional breakdown is a reflection of where the industry is focused, according to Hershey, even though it has been growing in the U.S., Canada and Europe, too.
But Hershey says that could change, especially as he believes there is one big indicator this year that could show where the N America market stands on the subject: The Fortnite World Cup.
He commented: “I think with the user base that we have in Fortnite, especially in the U.S., it has the potential to really mark a diversification in what different game titles are going to be popular.
“I think it certainly meets our criteria for being in esports, and it will be a good barometer whether North America can really get on board.”
NERD is the 2nd ETF to focus on the esports space. VanEck launched the VanEck Vectors Video Gaming and Esports ETF (which is listed as ESPO), which boasts an equal number of holdings, last Autumn. Unlike NERD, though, ESPO consists mostly of game publishers, with some hardware names thrown in too.
Many investors will be eagerly eying the progress of the ETF to see if it lives up to the hype, and can bring success to the once niche sector of the market that is firmly establishing itself as a dominant force in the digital entertainment ecosphere of today.