Gaming in the form of video games, eSports, and online gambling has soared in popularity in recent years, especially during the past year as consumers worldwide have worked or sheltered at home amid the COVID-19 pandemic. Investors seeking exposure to this trend can find several exchange-traded funds (ETFs) that hold baskets of gaming stocks. Gaming ETFs originally focused on casino and gambling companies, but they increasingly have broadened their scope to own stocks of companies involved in video games and eSports, as well as legal betting on professional sports.

Key Takeaways

  • The gaming industry, represented by both the consumer discretionary and communications services sectors, has outperformed the broader market in the past year.
  • The ETFs with the best 1-year trailing total return are NERD, BJK, and HERO.
  • The top holdings of these ETFs are Activision Blizzard Inc., Evolution Gaming Group AB, and NVIDIA Corp., respectively.

Gaming stocks tend to fall into either the consumer discretionary or communications services sectors for gambling and video gaming companies, respectively. As such, there is no single benchmark that fully captures the performance of the gaming industry. The consumer discretionary and communications services sectors have each outperformed the broader market in the past year. As of May 6, the Consumer Discretionary Select Sector SPDR ETF (XLY) posted a 1-year trailing total return of 56.7% and the Communication Services Select Sector SPDR ETF (XLC) had a total return of 56.6%. By comparison the S&P 500 had a total return of 50.0%.

There are 5 ETFs that trade in the U.S. focused on the gaming industry, excluding inverse and leveraged funds, as well as those with under $50 million in assets under management (AUM). The best-performing gaming ETF for Q3 2021, based on performance over the past year, is the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD). We examine the top 3 best gaming ETFs below. All numbers below are as of May 10, 2021.

Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD)

  • Performance over 1-Year: 92.7%
  • Expense Ratio: 0.50%
  • Annual Dividend Yield: 1.01%
  • 3-Month Average Daily Volume: 71,336
  • Assets Under Management: $105.5 million
  • Inception Date: June 4, 2019
  • Issuer: Roundhill Financial LLC

NERD tracks the Roundhill BITKRAFT Esports Index, a rules-based index designed to gauge the performance of the growing eSports market. The ETF offers exposure to companies engaged in the eSports and digital entertainment markets. The multi-cap fund offers exposure primarily to areas such as games, hardware, and media. NERD provides broad geographical diversification, and half of its holdings are based in the U.S., China, and Japan. It follows a blended strategy, investing in a mix of both growth and value stocks. The fund's top three holdings include Activision Blizzard Inc. (ATVI), a video game holding company; Corsair Gaming Inc. (CRSR), a provider of video gaming and streaming peripherals and hardware; and Tencent Holdings Ltd. (700:HKG), a China-based multinational technology company offering Internet-related services and products.

VanEck Vectors Gaming ETF (BJK)

  • Performance over 1-Year: 76.6%
  • Expense Ratio: 0.66%
  • Annual Dividend Yield: 0.41%
  • 3-Month Average Daily Volume: 57,909
  • Assets Under Management: $165.1 million
  • Inception Date: Jan. 22, 2008
  • Issuer: VanEck

BJK tracks the MVIS Global Gaming Index, which is designed to represent the performance of companies involved in casinos and casino hotels, sports betting, lottery services, gaming services, gaming technology, and gaming equipment. The ETF provides exposure to companies deriving at least 50% of their revenue from operations engaged in the global gaming industry. Most of the fund's holdings are companies operating within the consumer discretionary sector. Nearly half of its holdings are based in the U.S. The rest are geographically diversified and are located in a number of countries throughout the world. The multi-cap fund employs a blended strategy of investing in both value and growth stocks. Its top three holdings include Evolution Gaming Group AB (EVO:OME), a Sweden-based provider of live casino solutions to online casino operators; Flutter Entertainment PLC (FLTR:DUB), an Ireland-based provider of mobile and online gambling services; and Las Vegas Sands Corp. (LVS), a casino and resort company.

Global X Video Games & Esports ETF (HERO)

  • Performance over 1-Year: 73.5%
  • Expense Ratio: 0.50%
  • Annual Dividend Yield: 0.70%
  • 3-Month Average Daily Volume: 334,673
  • Assets Under Management: $681.4 million
  • Inception Date: Oct. 25, 2019
  • Issuer: Global X

HERO tracks the Solactive Video Games & Esports Index, designed to gauge the performance of companies operating within the global video games and eSports markets. The ETF is designed to provide exposure to companies that develop or publish video games, facilitate content streaming and distribution, own and operate competitive eSports leagues, or produce hardware for video games and eSports. The fund's holdings primarily operate within the consumer discretionary, communication services, or information technology sector. HERO also offers broad geographical diversification even though more than half of its holdings are based either in the U.S. or Japan. The multi-cap fund is focused on stocks with high growth potential. Its top three holdings include NVIDIA Corp. (NVDA), a multinational technology company that designs graphics processing units (GPUs); class A sponsored ADRs of Sea Ltd. (Singapore) (SE), a Singapore-based provider of digital entertainment, e-commerce, and digital financial services; and Activision Blizzard.

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