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Breaking Down Esports ETFs - What's Available?

As the esports industry continues to grow and solidify its position in today's business world, investors are paying attention. There are several esports ETFs (exchange-traded funds) which help investors get in on the esports action.

As esports tournaments fill professional sports arenas, and major brands from automobiles, food and beverage, and fashion strike more deals, investors are looking for ways to get into the esports action, without investing in a team or league.

What is an ETF?

Exchange-traded funds (ETFs) are groupings of stocks, bonds, commodities, or other securities, which allow investors to diversify their investment while only purchasing one 'share' of the ETF.  Common ETFs in the stock market follow indexes like the S&P 500, or Dow Jones, so investors can spread their risk.  There are ETFs in every industry, from technology stocks, blue chip stocks, healthcare, and more.

New over the past year, are esports ETFs.  Like other ETFs, these assets are groupings of stocks of esports organizations, allowing retail investors to get into the esports action and to spread their investment around a number of organizations, allowing them to essentially invest in the esports industry, instead of one esports company.

What Esports ETFs Are Available?

The Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD) was launched this past June.  According to the ETF, "The index tracks the performance of the common stock of exchange-listed companies across the globe that earn revenue from electronic sports, or esports related business activities."  Notable holdings in this fund are Turtle Beach Corp, Activision Blizzard Inc, Douyu International Holdings Ltd, Electronic Arts Inc and more. 

The VanEck Vectors Video Gaming and eSports ETF (ESPO) is another ETF which was launched in October of 2018.  The ETF is comprised of similar stocks as the NERD fund, including organizations like Activation Blizzard, NVIDIA, Electronic Arts, Take-Two Interactive Software, and more.  According to the ETF, "The index is a global index that tracks the performance of the global video gaming and esports (also known as electronic sports) segment."

The ETFMG Video Game Tech ETF (GAMR) is an ETF which is focused on the video game industry, more than specifically esports.  "The index tracks the performance of the common stock of exchange-listed companies across the globe that are actively engaged in a business activity supporting or utilizing the video gaming industry."

The Defiance NextGen Video Gaming ETF (VIDG) was launched in August of 2018, and as the ticker suggest is focused on the broader video game industry:  "The index consists of a modified market capitalization-weighted portfolio of the stock of companies whose products or services are predominantly tied to video gaming".

Esports Welcomes the new 'HERO' ETF

Global X, and ETF organization, announce this past week that it is planning to launch the Global X Video Games & Esports ETF with the ticker symbol "HERO." According to the press release, it will be based on the Solactive Video Games & Esports Index, which has 38 companies in it.

What's different about 'HERO' compared to the other ETFs listed above, is that it has a direct esports focus, while the others are focused on the gaming and video game industry in general, which encompasses esports. 

Will Hershey, co-founder of Roundhill Investments, said "We focus on thematic products targeted to the next generation of investors — and there is excitement about esports. [New England Patriots owner] Bob Kraft even bought into the Overwatch League with the Boston Uprising. We want companies that live and die on esports,".

“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,” Hershey told CNBC.  “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".

A Big Step for the Industry

This is another big step for the esports industry, adding legitimacy, bringing in new capital, and new exposure to the quickly growing space.  Just because the esports industry is growing, does not mean these ETFs will increase in value.  Like other ETFs and stocks, this will ultimately depend on the profitability of the companies within the funds.  The 'HERO' ETF may be better suited for investors with slightly more risk tolerance than the other video game ETFs, but if the esports industry can figure out how to increase revenues and bottom line profits, the 'HERO' ETF may serve as the hero of your portfolio.

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