ETC Group launches metaverse ETF
ETC Group, the crypto ETF specialist, is launching Europe’s first metaverse ETF.
The ETC Group Global Metaverse UCITS ETF Fund (METR) will track the Solactive ETC Group Global Metaverse index. ETC Group has worked with Solactive to develop the index.
The ETC Group Global Metaverse UCITS ETF Fund (METR) will track the Solactive ETC Group Global Metaverse index. ETC Group has worked with Solactive to develop the index.
The index is built in a multi-step process that’s complex. It starts out with a blacklist of four industries, including casinos, electronics stores and food retail.
It then lists a cluster of business activities that are thought to be relevant to the metaverse. In this case: virtual reality, video games, blockchain, digital infrastructure and the creator economy. (Index methodology here).
Solactive then uses keyword searches to scan public documents for companies that are relevant to the above business activities.
Solactive’s hits are then sense checked to make sure that there are no bogeys and determine the final universe of companies.
Companies are then weighted through a multistep process, which involves giving greater weight to favoured business activities. The favoured business activities are virtual reality and augmented reality.
The result is an index that focusses on the US tech sector and global video games makers. Apple, Snap, S4 Capital, and Facebook are the top holdings according to the Factsheet on Solactive’s website as of 11 March.
HANetf will provide white labelling for the fund.
The fund charges 0.65%.
Bernie’s commentary – hence the complex index
The first question a lot of investors have about the metaverse is what on earth is it? And how much is interest in this theme just a reaction to Facebook changing its name?
While it’s a bit of a buzzword, my understanding is that the metaverse is kind of like the book and movie Ready Player One. The metaverse is basically just a shared online world full of other people that you interact with and then interacts back at you. Imagine video games like Runescape or World of Warcraft, but in 3D and far more immersive. It all sounds pretty exciting.
The second question an investor might ask is what are the companies that provide this exposure. And here unfortunately is where the proposition comes a bit unstuck. There aren’t really any pureplay metaverse companies as such. And pureplays are the lifeblood of any thematic ETF. The nearest thing to it might be Roblox, the children’s video game company that provides small virtual worlds. However you could make a strong argument that Roblox is just a more open source video game publisher.
I suspect its these two things – the lack of a clear definition, and the lack of obvious pureplays – that explain the complex index methodology this fund uses. When you don’t have a clear definition of a theme, and you don’t have any pureplays companies falling under the theme, it is hard to build a thematic index.
Still, I was glad to see that ETC Group hadn’t just built a FANG ETF. Covering the Canadian Metaverse ETF launches last year, we noticed that two of them were just high-fee high-marketing FANG ETFs.
This seems to be something different.