Market Overview

An Electric Outlook For The Esports ETF

An Electric Outlook For The Esports ETF

Among the new exchange traded funds that debuted last year, the VanEck Vectors Video Gaming and eSports ETF (NYSE: ESPO) qualifies as one of the more thematic options.

ESPO's status as a thematic ETF is a trait that bolster the case for this fund, particularly when examining the long-term growth trajectory of the esports industry.

What Happened

ESPO debuted in October and had $10.20 million in assets under management as of Feb. 14. While that doesn't sound like much, investors have been nibbling at the esports ETF this year. ESPO has taken in $4.34 million since the start of 2019, an impressive percentage of the fund's total assets under management.

ESPO follows the MVIS Global Video Gaming and Esports Index, “which is intended to track the overall performance of companies involved in video game development, esports, and related hardware and software,” according to VanEck.

Why It's Important

Up 9.32 percent year-to-date, ESPO could be starting to reflect the expectations surrounding the long-term growth of the esports business. Expectations that could see esports viewership eventually rival that of the National Football League.

“In 2018, we estimate the global monthly audience for eSports will reach 167mn people, based on data from NewZoo, larger than that of Major League Baseball and the National Hockey League,” said Goldman Sachs in a note published in the fourth quarter. “We estimate the total online population is over 3.65bn people globally, to go along with 2.2bn gamers, but eSports viewers represent just 5% of the online population TAM, which suggests that there should be plenty more runway for audience growth. By 2022, we estimate the eSports audience will reach 276mn, similar in size to the NFL today.”

Mainstream acceptance and adoption are critical elements in fast-growing themes delivering on that growth and investors' expectations. On that front, esports is well on its way.

“Due to the growing popularity of survival-based games Fortnite and PUBG, we believe eSports viewership is moving more into the mainstream, which should support a 14%audience growth CAGR for the next 5 years,” according to Goldman Sachs.

What's Next

Esports revenue growth projections for the next several years are staggering. In 2017, the industry generated $655 million in revenue, a number that could swell to $3 billion by 2022, according to Goldman Sachs.

ESPO is home to 25 stocks, including NVIDIA Corp. (NASDAQ: NVDA), Electronic Arts Inc. (NASDAQ: EA) and Advanced Micro Devices Inc. (NASDAQ: AMD).

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