New York-based investment adviser Roundhill Investments is preparing to make its European debut with the introduction of a thematic ETF targeting companies involved in the development of the Metaverse.

The Metaverse is expected to be richly integrated into the physical world.

The Roundhill Ball Metaverse UCITS ETF (METV GY) is due to list on Xetra later this month and will come with an expense ratio of 0.59%.

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, and 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.

The ETF will seek to capture the Metaverse investment opportunity by tracking the Ball Metaverse Index which was developed by Ball Metaverse Research Partners, an indexing and research firm focused on the Metaverse. The index also serves as the underlying to the NYSE-listed Roundhill Ball Metaverse ETF (METV US) which was launched in July 2021 and currently houses $670 million in assets.

Tim Maloney, CEO of Roundhill Investments, said: “We believe that all investors should have the ability to invest in our themes, not just US investors. This launch will be an important step towards achieving that goal. We’re excited to debut our first fund in Europe and look forward to offering additional products in the future.”

Matthew Ball, Managing Partner of Ball Metaverse Research Partners, added: “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.”

Methodology

The Ball Metaverse 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 (81.1%) of the index is currently allocated to stocks listed in the US with the next-largest country exposures being South Korea (4.2%), Singapore (3.7%), and Taiwan (3.6%).

Companies operating in the computing components, cloud solutions, and gaming platform industries each account for roughly a fifth of the index weight, while social networks make up 14.1%.

Notable positions include Nvidia (8.9%), Microsoft (8.1%), Meta Platforms (6.6%), Apple (4.6%), Amazon (4.5%), and Taiwan Semiconductor (4.4%).

The fund will be amongst the first Metaverse thematic ETFs in Europe with thematic and digital assets ETP provider ETC Group also indicating that it will introduce a similar fund in the near future. The ETC Group Global Metaverse UCITS ETF (METR) will track the Solactive ETC Group Global Metaverse Index and will come with an expense ratio of 0.65%.