If you’ve ever put on a virtual reality headset, then you know that VR is pretty cool. But is the concept big enough to support an exchange-traded fund devoted to that industry?
We’ll find out soon enough with Wednesday’s launch of the Defiance Future Tech ETF (AUGR), whose ticker symbol plays into the product’s focus on augmented reality and virtual reality technologies.
The fund is the first product from Defiance ETFs, which has a couple of other funds in the queue designed to tap into transformative technologies.
In simple terms, augmented reality is a technology driven enhanced version of reality, while virtual reality is a three-dimensional, computer-generated artificial environment.
AR/VR technology has been evolving for decades (the term “virtual reality” was coined in 1987), and it has made quantum leaps this century. It burst into the public consciousness with Facebook’s $2 billion purchase of VR hardware and software maker Oculus Rift in 2014. People were stunned by the purchase price, but Facebook CEO Mark Zuckerberg said he saw the future, and it was virtual.
While the Oculus deal has yet to be a bonanza for Facebook, AR/VR technology has expanded from its gaming roots into the real world of healthcare, retail, manufacturing, entertainment and elsewhere, says Matthew Bielski, founder and CEO of Defiance ETFs.
He notes the AUGR fund was created to give investors a targeted exposure to this fast-growing technology. According to Statista, a statistics website, the VR industry is forecasted to grow from $2.2 billion in 2017 to between $19 billion and $21.5 billion in 2020.
The AUGR fund tracks the rules-based, modified equal-weighted BlueStar Augmented and Virtual Reality Index comprised of companies whose products and services are predominantly tied to the development or commercialization of augmented or virtual reality technologies.
According to the fund’s prospectus, those technologies include artificial intelligence; gaming systems; graphic processing units; image and touch display manufacturing; sensors used for touch, depth, or image perception; and software or applications dependent on augmented and virtual reality.
The AUGR fund’s top five holdings comprise Nintendo, Silicon Motion Technology, Lenovo Group, Corning and “Cash & Other.” The rest of the portfolio’s 59 holdings is laden with large-cap tech names— including leading players in the AR/VR space such as Facebook, Alphabet, Microsoft, Samsung and Sony—and a decent slice of smaller, less-familiar companies.