Thematic ETFs have long epitomized the flexibility and discrete nature of the ETF wrapper. With liquidity and trading simple, issuers and asset managers could craft a whole slew of potential strategies. The 2021 ETF rule made that even easier, turbocharging the thematic ETF space. While many thematics failed to take off, some have stuck around and, in gaming ETF ESPO’s case, have actually seen a big uptick in attention this year.
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The VanEck Video Gaming and eSports ETF (ESPO) launched even before the arrival of the ETF rule. Charging 56 basis points, the gaming ETF tracks the MVIS Global Video Gaming & eSports index. The index provides a market cap-weighted list of fewer than 30 names, helping it offer a concentrated exposure to the category. Companies therein have to come from just a select few subsectors, including gaming hardware and software.
The gaming ETF has, with that approach, seen its AUM rise considerably YTD. According to YCharts data, the fund has gone from about $279 million in AUM to just under $500 million, at $496 million as of September 22. It has done so with just about $70 million in net inflows for the year, a healthy flows number boosted by price appreciation for its investments.
The fund’s holdings include some intriguing opportunities. For example, its largest holding according to ETF Database, AppLovin Corp (APP), has returned a staggering 100% YTD, per YCharts. The firm’s focus on mobile marketing software via programs like MAX and SparkLabs has helped it deliver an eye-watering 259% return on equity and 77% year-over-year quarterly revenue growth. Other names like Nintendo (7974) and Unity Software (U) play leading roles, deepening the ETF’s focus on gaming software and development names.
Together, that has helped the gaming ETF return 45.5% YTD, per ETF Database data. That outperformed its ETF Database Category and FactSet Segment averages in that time.
Are thematics on the rise? At least in the gaming category, ESPO appears to be delivering with its laser focus on its theme. For those wanting exposure to an important and exciting technology space, the gaming ETF could be one to watch.
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