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Get Ready For Another Video Game ETF

June 11, 2019 12:25 pm
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Get Ready For Another Video Game ETF

A new video game and esports exchange traded fund debuted last week, bringing new competition to the video game ETF space. That competition is set to heighten as the issuer of an existing thematic ETF is poised to convert that fund to a video game offering.

What Happened

Last week, Defiance ETFs said it will convert the Defiance Future Tech ETF (NYSE:AUGR) to Defiance Next Gen Video Gaming ETF (VIDG). That conversion will occur on June 24.

“Augmented and virtual reality is a disruptive technology that we continue to believe in, but we feel investors will be better served by a fund that focuses on one of the key areas where this technology may have significant current impacts, which is why we’re magnifying the focus of the fund to hone in on the video game space,” said Paul Dellaquila, Global Head of ETFs at Defiance, in a statement.

Why It's Important

AUGR debuted on July 31, 2018, but has managed to accumulate just $3.5 million in assets under management. AUGR currently charges 0.40 percent per year, or $40 on a $10,000 investment, but when the Defiance Next Gen Video Gaming ETF comes to life, that ETF will carry an annual fee of 0.30 percent.

The Defiance Next Gen Video Gaming ETF will follow the Bluestar Next Gen Video Gaming Index. BlueStar is the index provider for the other two Defiance ETFs: the Defiance Quantum ETF (NYSE:QTUM) and the Defiance 5G ETF (NYSE:FIVG).

The idea of converting a scuffling ETF to another investment objective is not new. Earlier this month, First Trust launched its own 5G ETF, scrapping what was the fund industry's first dedicated smartphone ETF in the process.

What's Next

Companies in VIDG's underlying index include Microsoft Corp. (NASDAQ:MSFT), Activision Blizzard (NASDAQ:ATVI) and Electronic Arts (NASDAQ:EA).

It remains to be seen if the new ETF will be successful, but its annual fee of 0.30 percent puts it at the lower end of the spectrum for this category and thematic ETFs in general, which could prove to be an advantage when it comes to attracting assets from investors.

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