New ETF Targets Virtual & Augmented Reality

Roundhill Investments has brought a virtual and augmented reality thematic fund to market with the Roundhill Ball Metaverse ETF (META), more than two years after the sole fund in that space folded.

META launched Wednesday on the NYSE Arca, and has an expense ratio of 0.75%. It tracks a proprietary index that focuses on companies with at least $250 million in market capitalization and a trailing six-month history of at least $2 million in daily trading volume.

Wait, What’s The Metaverse?

Good question.

The metaverse is the concept of multiple 3D virtual spaces combining with the physical world in a constant manner. Its earliest and most popular iterations have been as multiplayer games such as “Second Life,” and through hardware like virtual-reality headsets, motion-tracking equipment and augmented-reality hardware like the Google Glass.

While that seems like a niche focused on VR and gaming enthusiasts willing to spend a few hundred dollars for dedicated devices, a large swath of the world’s population already has a multiverse-capable device in their pocket: their smartphones.

Our phones can hook into location-based augmented-reality systems by combining live camera imaging and real-time processing hardware. Think of Pokemon GO, a smartphone game that makes players move to a physical point in the real world for a shot of catching a Pokemon visible through their phones, or a geolocation-enabled filter in Snapchat.

Snapchat’s parent company has also rolled out filters on behalf of retailers that allow users to virtually try on clothing or get a sense of what a piece of furniture would look like in their house, along with direct links to buy at that retailer’s site.

Diverging Exposure

With much of the metaverse’s history in the realm of games, it’s no surprise that META carries heavy exposure to the video game industry.

As of launch, the fund’s top holdings include Roblox and Tencent, along with hardware makers Nvidia and Qualcomm. It also devotes a fair amount of weight to Autodesk and Unity Software, which are used to develop 3D images and graphics engines.

At the same time, it also holds exposure to big tech platforms like Microsoft, Apple, Facebook and Google parent Alphabet, which all produce virtual reality apps or distribute third-party software through their app stores.

(Use our stock finder tool to find an ETF’s allocation to a certain stock.)

In effect, META fills the thematic gap left by the Tactile Analytics ETF (ARVR) when Exchange Traded Concepts shuttered it at the end of 2018.

The launch aligns with the rest of Roundhill’s lineup of ETFs focused on cutting-edge themes such as online gambling, esports, streaming services and professional sports. The firm has roughly $627 million in assets across its five existing ETFs.

[Editor's Note: This article previously described Defiance ETFs as the issuer of ARVR. Exchange Traded Concepts was the issuer of that fund.]

Contact Dan Mika at [email protected], and follow him on Twitter.