Examining The VanEck Esports ETF And Its 30% Surge This Year

The stock returns of video game makers, such as Activision Blizzard ATVI and Electronic Arts EA, have been impressive this year. In fact, those video game giants are up an average of about 22% year to date, but that pales in comparison to the 30.23% returned by the VanEck Vectors Video Gaming and eSports ETF ESPO.

What Happened

ESPO and rival ETFs are largely viewed as thematic investments, but that status should not dissuade investors, particularly not when the underlying instrument is effectively structured, as is the case with ESPO. The $38.2 million fund, which turns 1 year old next month, follows the MVIS Global Video Gaming and eSports Index.

ESPO is more than effectively levered to compelling trends in the eSports/competitive gaming niches, explosive arenas that in terms of TV viewership, are on pace to pass all major U.S. athletic leagues except the NFL.

Why It's Important

ESPO “provides targeted access to the largest companies involved in developing and publishing video games, esports and related hardware,” according to VanEck. “The resulting portfolio is global, with heavy representation from the U.S. and Asia. Some of the names in the portfolio are more well-known than others.”

In addition to obvious video game fare, ESPO is home to components makers, such as NVIDIA NVDA and Advanced Micro Devices AMD, giving the fund exposure to the hardware side of the video game industry.

“Advanced Micro Devices is a well-known U.S. semiconductor company that generates substantial revenues from Graphical Processing Units (GPUs) that facilitate the gameplay of video gaming on both PCs and console,” said VanEck. “Advanced Micro Devices’ chips are used in Microsoft’s popular Xbox console; Advanced Micro Devices was also chosen by Google to create custom GPUs for Google’s cloud gaming platform Stadia.”

What's Next

Importantly, ESPO is a global ETF. To that point, most of its ex-U.S. exposure is allocated to the Asia-Pacific region, which is chock full of booming eSports and video gaming markets. That is reflected in Japan, ESPO's second-largest country weight at 25.55%.

ESPO holding Bandai Namco “is a Japanese company that develops, manufactures and sells products across a number of different segments, primarily video games and toys,” according to VanEck. “Namco was the developer of the original Pac-Man series that was released in 1980, and the company continues to develop and sell games that are popular in Asia. Approximately 70% of company revenues are currently generated in Japan.”

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