Not surprisingly, video gaming ETFs have performed remarkably well since the start of the year. Below, we review the performance and differences of four ETFs exposed to the Video Gaming theme (source: www.etf.com).
The Story
Few sectors are as well-suited to a pandemic as the video game industry. As consumers have spent more time inside with their screens, almost all corners of the video game industry have benefited, from traditional game publishers to online-only, free-to-play game developers to streaming services and beyond.
However, there are some slight difference between the returns of the best-performing gaming ETF and the worst-performing. The Global X Video Games & Esports ETF (HERO) has risen +59.7% year to date, while the Wedbush ETFMG Video Game Tech ETF(GAMR) has returned “only” +47.7%.
Year-to-date performance of 4 Video Game ETFs
VanEck Vectors Video Gaming and eSports ETF (ESPO): +57.5%
Global X Video Games & Esports ETF (HERO): +59.7%
Wedbush ETFMG Video Game Tech ETF (GAMR) : +47.7%
Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD): +59.08%
Source: ETF.com; data as of August 6, 2020
What are the main differences between the various Gaming ETFs?
Wedbush ETFMG Video Game Tech ETF (GAMR)
Launched in 2016, GAMR offers perhaps the broadest interpretation of what it means to be a video game company. It breaks the industry into three segments: pure-play companies (software/hardware developers whose revenue depends solely on goods and services to the gaming industry); nonpure-play companies (companies that derive some but not all of their revenues from the gaming industry) and gaming conglomerates (business model broadly supports the gaming industry).
In all, 90% of the 86 companies in GAMR's portfolio fall into the pure-play or nonpure-play categories. For example, among GAMR's holdings are Apple (AAPL), Microsoft (MSFT) and Sony (SNE) which are nonpure-play companies. None of these three stocks appear in any of the other video gaming ETFs. Moreover, GAMR is also the only video gaming ETF to not have explicit coverage of eSports in its investment objective (though in practice, it does have some limited exposure in its holdings).
VanEck Vectors Video Gaming and eSports ETF (ESPO)
The biggest and most popular fund in the space is the VanEck Vectors Video Gaming and eSports ETF (ESPO). ESPO now has assets under management of $400 million.
ESPO's portfolio is highly concentrated, tracking just 25 companies that derive at least half their revenues from video gaming or eSports. These include game developers, hardware makers, streaming services, eSports games and hardware makers; and those involved in running eSports events, such as league operators, teams, distributors and platforms.
ESPO has a significant weighting to hardware makers like NVIDIA (NVDA) and Advanced Micro Devices (AMD), 9% and 7% respectively. Both stocks have been doing very well. Moreover, ESPO has significant allocation to traditional PC and console video games, with more than 52% of its portfolio invested in names such as Nintendo.
Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD)
NERD is a pure-play eSports fund that delves deep into the burgeoning industry. NERD takes the same tiered approach as GAMR, sorting stocks into similar pure-play, core and noncore buckets. But NERD's portfolio remains very much focused on eSports companies, with holdings that include eSports game developers and publishers, streaming platforms, tournament/event organizers, league operators/owners, team owners, gaming hardware and tech companies. The ETF does not own any Apples or Sonys in sight. However, the fund has a hefty weighting in eSports tournament-related stocks.
Global X Video Games & Esports ETF (HERO)
With its blend of traditional video game companies and eSports, HERO's portfolio is structured much like that of ESPO. Indeed, HERO has a strong weighting in traditional video game publishers and developers. But it also has 41 holdings, compared with ESPO's 25, and more of HERO's holdings are in online/mobile game developers and platforms, especially those based in China, Japan and South Korea.
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