What does ESPO ETF do?
VanEck gives investors access to a portfolio of 25 global businesses that are heavily involved in the e-gaming world.
It’s a fairly concentrated investment. The top ten holdings are responsible for around 60% of the portfolio’s weighting.
You’ve probably heard of some of the largest positions including: NVIDIA, Tencent, Advanced Micro Devices, Sea, Nintendo, Activision Blizzard, Netease, Take-Two Interactive Software, Nexon and Electronic Arts.
These businesses are involved in different parts of the gaming world. Some make the hardware and software, including the semiconductors. Others make the games. VanEck, the ETF provider, says that 4.3% of the portfolio is invested in ‘leisure equipment and products’.
How good is it?
I think the e-gaming world is just going to get bigger and bigger over time. Particularly as technology like virtual reality and augmented reality grow in capability and popularity. That will allow these e-gaming businesses to charge more and more for their products and make higher profits.
Another reason why I’m attracted to the ETF is because of the global diversification. Whilst more than a third of the portfolio is invested in US shares, plenty of other countries (with exciting e-gaming companies) are represented. Japan has a 21.1% weighting, China has a 18.4% weighting, Singapore has a 6.6% weighting and South Korea has a 5.3% weighting.
The most impressive thing about this group of shares has been the returns. But past performance is no guarantee of future performance. Over the last five years, the average return per year of the index of these gaming shares has been 37.2% per annum. That’s a huge longer term return.
I think that the e-gaming industry is attractive because of the high profitability, the loyalty of gamers and the numerous ways that it can grow over the coming years.
Whilst the future returns are unknown, I believe that this growing theme will lead to better long term returns for VanEck Vectors Video Gaming and eSports ETF than the ASX index because of the focus on banks and resources.
I think ESPO can play a useful part in a portfolio over the next decade.