iShares Dips Its Toe in the Metaverse

BlackRock’s iShares exchange-traded fund unit filed a prospectus Thursday with the Securities and Exchange Commission for an ETF that will cover the metaverse.

The iShares Future Metaverse Tech and Communications ETF does not yet have a ticker, expense ratio or listing exchange, but the document notes the fund will track the Morningstar Global Metaverse & Virtual Interaction Select Index. 

The filing points out that Morningstar defines the metaverse as a “three-dimensional immersive digital world,” identifying six key themes: metaverse platforms; wearable technology and VR/AR; enhanced social media; immersive gaming; 3D rendering and simulation software; and digital assets and payments. The proposed ETF’s underlying index is derived from the Morningstar Global Markets ex-India Index, the prospectus says.

Eligible companies are scored on their exposure to the different themes and must be determined to have a high likelihood of seeing a material increase in net profits related to that exposure over the next five years. Scores are based on how much of a company’s revenue is derived from exposure to the themes.

Companies are selected based on their exposure scores until 50 constituents are included in the index. From there, index constituents are weighted by market capitalization, with individual weights adjusted based on exposure scores, according to the document. 

There are currently seven ETFs targeting the metaverse theme. The Roundhill Ball Metaverse ETF (METV) is the largest and oldest, having first debuted in June 2021, and which currently has $430 million in assets.

No other fund in the category has more than $12 million, suggesting that either investors aren’t currently that interested in such a speculative theme at the moment or that there’s space for a major player in the ETF industry to stake out a claim.

Contact Heather Bell at [email protected]