As has been widely reported, the growth trajectories of the esports and video game industries are compelling, but prior to Tuesday, there were just two exchange traded funds dedicated to those themes.
What Happened
There is a new competitor in the esports ETF arena thanks to the debut of the Roundhill BITKRAFT Esports & Digital Entertainment ETF NERD. That's a lengthy name for an ETF, so suffice to say this fund will likely be known by “NERD.” Not even six months into the year, it's pretty safe to say the 2019 competition for ETF ticker of the year is over.
NERD tracks the Roundhill BITKRAFT Esports Index, also known as the NERD Index. That benchmark is home to companies involved in the competitive gaming, which the issuer defines as “video game publishers, streaming network operators, video game tournament and league operators/owners, competitive team owners, and hardware developers.”
Why It's Important
A slew of data points bode well for the long-term fundamentals of esports and video game investments, something NERD's issuer isn't shy about sharing.
“There are 454 million esports viewers worldwide, growing to an estimated 645 million by 2022. More people watch video games than Netflix, HBO, ESPN, and Hulu – combined,” according to Roundhill Investments. “The video gaming market of $138 billion in 2018, and is expected to grow at an estimated 10% per year from 2017 – 2021.”
NERD is home to 25 stocks, 53.5 percent of which are large caps and 20.8 percent of which are mid caps. The new ETF reflects the global nature of esports and video games as 11 countries are represented in the fund with the largest geographic weight assigned to the U.S. at 20.9 percent. The median market value of NERD's components is $4.6 billion, putting the new fund firmly in mid-cap territory.
Just two of NERD's top 10 holdings – Activision Blizzard Inc. ATVI and Take-Two Interactive Software TTWO – are U.S.-based companies.
What's Next
As noted earlier, NERD squares off against two established competitors, but the new ETF has something going for it: a lower expense ratio.
NERD charges 0.25 percent per year, or $25 on a $10,000 investment, while the established esports ETF charges 0.55 percent and the legacy video game ETF has an annual fee of 0.75 percent.
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