Ark Investments’ Cathie Wood isn’t the only one having a good year in managing ETFs.
VanEck Associates is also riding high with its $829.3 million VanEck Vectors Video Gaming and eSports ETF (ESPO), which has offered a year-over-year return of 89.54% as of today.
That performance has been buoyed by the pandemic-induced “stay-at-home” trade, where more consumers are turning to video games and other forms of digital entertainment to keep themselves occupied, especially during times of cold and otherwise inclement weather, said J.P. Lee, a product manager for VanEck.
“Video games are now being integrated into people’s lives in ways that were unimaginable five years ago,” said Lee. “There are concerts on games like Fortnite that are attracting 12 million to 20 million people, who are both experiencing the game and enjoying the content of a concert simultaneously. That’s the kind of interactivity that is going to be the future of entertainment.”
Lee said that video gaming will continue to become intertwined with other parts of human culture as technology accelerates, driving further growth.
ESPO targets video game developers and publishers as well as participants in the e-sports phenomenon. E-sports are literally games played as sport, competitive video gaming that often involves virtual or in-person spectators. It tracks the MVIS Global Video Gaming & eSports Index.
The unusual twists and turns of financial markets during the Covid-19 outbreak makes it an opportune time for advisors to consider including a thematic ETF as part of the growth sleeve of their client portfolios, said Lee, because “alpha potential” is the chief attraction of thematic ETFs.
“These are growth opportunities that aren’t being reflected in the broad-market indexes,” he said. “If you believe that a theme, like videogames and e-sports, has long-term legs and that these companies will participate in forward-looking growth, then it makes sense that these types of ETFs will be very useful in your portfolios.”
Thematic ETFs “punched above their weight” through the volatility and recovery in 2020, said Lee, and received more flows than they should have as a percentage of overall market share—a sign that advisors and individual investors have become accustomed to thematic investing using ETFs.
Video games themselves are a structural long-term growth story, said Lee. It’s been 50 years since the first arcade-based cabinet video games were developed and 49 years since the launch of the first home-based videogame console, Magnavox’s Odyssey.