Virtual Reality ETF Debuts

August 01, 2018

Defiance ETFs, a brand-new issuer, today is rolling out its first fund, which looks to capture performance of the augmented and virtual reality space. The Defiance Future Tech ETF (AUGR) tracks an index provided by BlueStar Indexes.

The fund comes with an expense ratio of 0.65% and lists on the NYSE Arca.

Defiance was founded by Matt Bielski, and alum of ETF issuers like ProShares and BlackRock’s iShares. Most recently, he left Direxion to form Defiance. The firm is primarily focused on the technology space.

“We really try to give you very precise exposure to the more disruptive technologies,” Bielski said.

“We want to be passive beta exposure to disruptive technology sectors,” he added, noting that he does not believe in active management.

Methodology

According to AUGR’s prospectus, its underlying index targets companies that are primarily involved in the “development or commercialization” of augmented and virtual reality technologies such as artificial intelligence, gaming systems and the components needed to create those technologies, including sensors, displays and software.

The components are selected based on publicly available regulatory filings. To be eligible for inclusion, they must have at least $150 million in market capitalization and meet minimum liquidity requirements. The selected companies are equally weighted, but their weights can be adjusted downward to compensate for lower liquidity levels. Rebalancings and reconstitutions occur semiannually, and as of mid-July, the index included 62 securities listed on domestic and foreign stock exchanges, the prospectus says.

“The AR/VR space has extended far beyond its roots in gaming to applications in health care, retail, manufacturing, entertainment and more,” Bielski said.

Roughly 60% of the fund is U.S. companies, with foreign countries represented in the index including Japan, South Korea and France. The constituents include such big names as Nintendo, Disney, Sony and Snapchat, but also lesser-known names such as Dassault Systemes, Kopin and Battle Technologies, according to Bielski.

“We think it’s a great product for a satellite of a technology allocation,” he said, noting that the focus is really on companies that are developing augmented and virtual reality technology.

“That’s really important, because that gives you pure exposure and maintains the integrity of the disruptive sector we’re trying to benchmark to,” Bielski added.

Contact Heather Bell at [email protected]

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