VanEck’s ESPO rises on thematic wave
VanEck Vectors Video Gaming and eSports ETF (ESPO) has returned 84.24 per cent (NAV) for the year in another fine example of right place, right time investing.
ETF product manager for ESPO, JP Lee explains that the US version has USD943 million under management, while the Ucits version sits at over USD1 billion, having, until recently, enjoyed its status as the only product offering exposure to the media and entertainment market outside of the US.
Lee says: “The return this year reflects investors kind of realising the potential of growth for the sector. It’s a long-term structural growth story with lots of exciting things happening but there are other big picture trends that support the investment story.”
These, he says, lie in the growth of consumer demand for interactive entertainment, not just passive.
“Consumers want to interact mixing social media, bringing friends into the interactive on-line world,” he says.
Lee describes the process as cord-cutting, where consumers don’t want to have one big subscription but want to spend USD10 here and another USD10 dollars there, creating a collage or mosaic of entertainment.
“Games are, in a lot of ways, moving toward this repeat subscription model, almost like a Netflix model,” Lee says, also commenting that there is another huge trend with the demographics of people playing video games.
The outside world imagines that game playing is dominated by young people but the average gamer is 28 to 32, having grown-up playing video games and remained playing video games.
“The average gamer has a job, makes more money than the average consumer, is well-educated and spends money on video games. He or she is more prone to be more on line and also cut the cord and think about their entertainment package in a more fragmented way,” Lee says.
The demographics are replicated across the world, particularly in the emerging market countries, with huge populations.
Investors in ESPO are varied, from institutions using it strategically as an alpha generator in their portfolio because of the sector’s relatively low correlation with broad benchmarks. He also finds that it has risen on the wave of popularity for thematic investing.