Nikko Asset Management has unveiled a thematic equity ETF in Hong Kong providing actively managed exposure to companies worldwide that are developing and enabling the metaverse.
The metaverse is a hypothesized iteration of the internet, supporting persistent online 3-D virtual environments.
The NikkoAM Metaverse Theme Active ETF is listed on the Stock Exchange of Hong Kong in Hong Kong dollars (3091 HK) and US dollars (9091 HK) and has estimated ongoing charges of 1.25%.
The fund has been created by revamping one of Nikko’s existing strategies, the NikkoAM E-Games Active ETF.
The metaverse is a term used to describe the concept of a future iteration of the internet, made up of persistent, shared, 3D virtual spaces linked into a perceived virtual universe.
Combining aspects of social media, online gaming, augmented & virtual reality, e-commerce, and blockchain technology, the metaverse is expected to influence many aspects of people’s lives including how they interact, socialize, learn, shop, work, and play virtually.
While still in its infancy, the metaverse has already attracted billions of dollars of investment. Morgan Stanley analysts predict the metaverse has the potential to generate $8.3 trillion in total consumer expenditure in the US alone, depending on the level of disruption.
Investment approach
The ETF utilizes Nikko’s proprietary research to identify companies across several metaverse-related business categories.
Hardware companies refer to those that are developing physical technologies such as augmented & virtual reality devices, mobile phones, and enterprise hardware that will allow individuals and businesses to interact in a virtual environment.
Computing companies refer to those that are delivering computer power to support the operation of the metaverse. The category includes companies involved with semiconductors, data matching, and artificial intelligence.
Connectivity companies refer to those that are providing high bandwidth or networks enabling data transmission on the metaverse. Eligible firms include cloud service providers and telecommunication companies providing fiber networks.
Platform companies refer to those that are creating and operating immersive 3D worlds in the metaverse. Eligible firms include online gaming and social media platforms.
Tools companies refer to those that are providing protocols such as Web 3.0 and the facilitation of 3D rendering.
Payments companies refer to those that are facilitating transactions in the metaverse via fiat currency on-ramps, cryptocurrencies, and non-fungible tokens.
Content companies refer to those that are facilitating the creation, storage, distribution, and protection of digital assets such as games, online avatars, and NFTs. Eligible firms include electronic game developers and companies that offer NFTs on underlying assets.
There is one other ETF in Hong Kong targeting the global metaverse theme – the CSOP Metaverse Concept ETF (3034 HK) – which also adopts an actively managed approach. Its estimated ongoing charges are 2.00%.
The Samsung Asia Pacific ex NZ Metaverse Theme ETF (3172 HK), meanwhile, targets metaverse-related companies specifically located in the Asia Pacific region, also utilizing an active approach. Its ongoing charges are 0.85%.