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Revenge Of The NERD: This Esports ETF Could Be A Winner

August 21, 2019 12:29 pm
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Revenge Of The NERD: This Esports ETF Could Be A Winner

The esports industry is booming and a growing number of exchange traded funds are focusing on that very investment concept. That group includes the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NYSE:NERD).

What Happened

NERD debuted in early June and follows 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.”

A confluence of factors have plagued video game stocks and ETFs such as NERD over that time, but those slack performances belie long-term opportunity tied to eSports investments.

“Esports is the growing business of playing video games in front of audience,” said Roundhill Investments CEO Will Hershey in an email exchange with Benzinga. “Due to technological advances in multiplayer online gaming and streaming, esports is taking the next step as an industry.”

Why It's Important

Led by esports, gaming is the world's fastest-growing form of entertainment. The global video game market is expected to eclipse $190 billion in sales in just three years. That fact is widely known and out in the open, meaning what's important is how investors access the trend.

NERD helps investors meet the objective of broad-based exposure to the gaming industry and its growth drivers. While the ETF holds just 25 stocks, implying its a concentrated fund, NERD features exposure to four pivotal industries: games, hardware, media and broad themes.

“Gaming hardware companies produce peripherals (e.g. headsets, keyboards), gaming devices and processing units. These companies may act as endemic sponsors for popular streamers and teams. Examples: Razer, Micro-Star International,” said Hershey.

NERD also reflects the global nature of the gaming business as just about a quarter of the fund's weight is allocated to domestic stocks.

What's Next

Importantly, NERD has esports purity, something not all video game ETFs have. That's vital at a time when "League of Legends" is watched more than any other U.S. sport besides the NFL and as Goldman Sachs is forecasting global esports viewership to swell to 645 million in 2022.

“We wanted to create a vehicle for the average investor – retail and institutional – to be able to get exposure easily. This is a pure-play on the space,” said Hershey.

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