Roundhill Investments has launched a new thematic equity ETF providing exposure to companies linked to the rapidly-growing market of the Metaverse.
Matthew Ball, Managing Partner of Ball Metaverse Research Partners.
The Roundhill Ball Metaverse ETF (META US) has listed on NYSE Arca and comes with an expense ratio of 0.75%.
The Metaverse is a term used to describe the concept of a future iteration of the internet, made up of persistent, shared, 3D virtual spaces linked into a perceived virtual universe.
The Metaverse is expected to be richly integrated into the physical world, thereby creating a new medium and economy for work, leisure, and innovation, while transforming long-standing industries and markets such as finance, banking, retail, education, health, fitness.
Bloomberg Intelligence believes the market opportunity for the Metaverse can reach $800 billion by 2024, while disruptive-innovation investment specialists ARK Invest estimates that revenue from virtual worlds could hit $400bn by 2025, up from approximately $180bn in 2021.
In developing the ETF, Roundhill has partnered with Ball Metaverse Research Partners, a newly-formed indexing and research firm.
Matthew Ball, Managing Partner of Ball Metaverse Research Partners, said: “We consider the emergence of the Metaverse to be as transformative and valuable as the emergence of mobile internet and the fixed-line internet that preceded it. It likely will touch every industry and profession, enlarging and disrupting today’s leaders and leading to countless new companies and technologies.”
The fund tracks the Ball Metaverse Index which was developed and will be maintained by an ‘Expert Council’.
In addition to Matthew Ball, the council includes Jerry Heinz, Vice President of cybersecurity start-up ActZero; Jacob Navok, co-Founder and CEO of interactive streaming technology firm Genvid Technologies; Jesse Walden, Managing Partner of Variant Fund, a venture capital firm investing in crypto networks; Jonathan Glick, former Senior Vice President of Product & Technology at The New York Times Electronic Media Company; Anna Sweet, CEO of Bad Robot Games; and Imran Sarwar, former Director of Design and co-Producer of blockbuster video games Grand Theft Auto V and Red Dead Redemption 2.
The index selects its constituents from a universe of stocks listed globally that have market capitalizations above $250 million and average daily trading volumes greater than $2m.
It captures several categories of the Metaverse, which are weighted according to their ability to generate revenue from the Metaverse theme. Any single category is capped at 25%.
The categories are:
Hardware: The sale and support of physical technologies and devices used to access and interact with the Metaverse.
Compute: companies enabling and supplying computing power to support the Metaverse.
Networking: companies providing real-time connections, high bandwidth, and data services to consumers.
Virtual Platforms: companies developing and operating immersive digital, three-dimensional simulations and worlds wherein users can participate in a variety of experiences.
Interchange Standards: companies building tools, protocols, services, and engines that serve as standards for interoperability, and enable the creation, operation, and ongoing improvements to the Metaverse.
Payments: The support of digital payment processes and operations, which includes fiat on-ramps to pureplay digital currencies and financial services.
Content, Assets, and Identity Services: The design, creation, sale, resale, storage, secure protection, and financial management of digital assets, such as virtual goods and currencies, as connected to user data and identity.
Companies assigned to each category as defined as either ‘pure-play’, ‘core’, or ‘non-core’ depending on how critical the Metaverse is to that firm’s economic success.
At each rebalance, the weighting of securities within each category is set so that pure-play companies receive two and a half times the weight of core firms and five times the weight of those designated as non-core. Any single firm is capped at 8%.
The index is reconstituted and rebalanced on a quarterly basis.
Over three-quarters (76.1%) of the index is currently allocated to stocks listed in the US with the next-largest country exposures being China (9.9%), Taiwan (6.2%), and Singapore (2.7%).
Companies operating in the computing components and cloud computing industries each account for roughly a quarter of the index weight with gaming platforms (19.3%) and consumer electronics (8.9%) also playing significant roles.
Notbale positions include Nvidia (8.1%), Roblox (4.8%), Microsoft (4.5%), Tencent Holdings (4.4%), Taiwan Semiconductor (3.8%), Fastly (3.7%), Autodesk (3.5%), and Amazon (3.5%).