In what could a case of either hyper-segmentation or a stroke of brilliance, exchange-traded fund provider PureFunds and its partners on Wednesday launched niche-focused exchange-traded funds targeting drones and video games.

The PureFunds Drone Economy Strategy ETF (IFLY) and PureFunds Video Game Tech ETF (GAMR) both are billed as first-of-its kind ETFs, trade on the NYSE Arca exchange, have expense ratios of 0.75 percent, and are the antithesis of cookie-cutter funds. That could help them grab attention––at least in the short-term.

The IFLY fund tracks the Reality Shares Drone Index composed of 47 companies divided into two different categories––primary and secondary. Primary companies work in drone development, manufacturing and research. Secondary companies engage in supporting and supplying drone development, with suppliers having more than 10 percent of their revenue tied to pure-play drone companies.

The overall weights in both categories are capped based on the drone component of a holding's business, which is determined by the index committee. The index holdings are rebalanced semi-annually.

The military made drones famous by employing them in operations in Afghanistan and the Middle East, and defense purposes remain a major end market. But drone usage has been boosted by the recreational market and commercial uses involving the likes of agriculture, utilities and construction, among other activities.

According to a report cited in investor material from index creator Reality Shares, the drone industry is forecasted to create more than 70,000 jobs, will produce an economic impact of more than $13.6 billion, and will keep growing at a fast clip through 2025.

IFLY’s top 10 holdings include AeroVironment, Boeing, L-3 Communications and Honeywell. The U.S. makes up 55 percent of the fund, followed by France (17 percent) and Japan (9 percent).

Defense is the fund’s largest sub-industry exposure (64 percent). Commercial and recreational make up the rest at 21 percent and 15 percent, respectively.

Factor Advisors, a subsidiary of ETF Managers Group, an ETF-focused private label services company, is the fund’s investment advisor.

The GAMR fund is another collaboration between PureFunds and Factor Advisors, but this time with input from index provider EE Fund Management, whose EE Fund Video Game Tech Index underpins this ETF.

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