Gaming in the form of video games, eSports, and online gambling has soared in popularity as users worldwide spend more time 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. These gaming ETFs include funds that hold stocks for video games and eSports, as well as casino and gambling companies. These 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 January 29, the Consumer Discretionary Select Sector SPDR ETF (XLY) posted a 1-year trailing total return of 30.8% and the Communication Services Select Sector SPDR ETF (XLC) had a total return of 21.8%. This compared with a total return of 15.6% for the S&P 500.

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 returns are NERD, HERO, and ESPO.
  • The top holdings of these funds are HUYA Inc. Sponsored ADR Class A; Bilibili Inc. Sponsored ADR Class Z; and Tencent Holdings Ltd., respectively.

There are 5 ETFs that trade in the U.S. focused on the gaming industry, excluding inverse and leveraged funds, and those with under $50 million in assets under management (AUM). The gaming landscape is changing rapidly as eSports is becoming more popular and as sports betting becomes more widely legal. The best gaming ETF, based on performance over the last year, is the Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD). Below, we'll look at the 3 best gaming ETFs, measured by 1-year trailing total returns. Aside from benchmark returns above, all data are as of February 2, 2021.

Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD)

  • 1-Year Trailing Total Return: 117.2%
  • Expense Ratio: 0.50%
  • Annual Dividend Yield: 0.97%
  • 3-Month Average Daily Volume: 49,276
  • Assets Under Management: $89.3 million
  • Inception Date: June 4, 2019
  • Issuer: Roundhill Financial LLC

NERD is a multi-cap blended fund that targets the Roundhill BITKRAFT Esports Index. The index is designed to track the performance of esports companies and is built of a tiered weight portfolio of global video game industry companies. The fund includes video game publishers, competitive team owners, video game tournament and league operators, hardware companies, and streaming network operators. Among the top holdings for NERD are Sponsored ADR Class A shares of HUYA Inc. (HUYA), the Chinese live game streaming platform; Tencent Holdings Ltd. (700:HKG), the Chinese internet service and product conglomerate; and DouYu International Holdings Ltd. Sponsored ADR (DOYU), the Chinese interactive games and live streaming company.

Global X Video Games & Esports ETF (HERO)

  • 1-Year Trailing Total Return: 101.7%
  • Expense Ratio: 0.50%
  • Annual Dividend Yield: 0.68%
  • 3-Month Average Daily Volume: 272,943
  • Assets Under Management: $731.2 million
  • Inception Date: October 25, 2019
  • Issuer: Global X

HERO is a multi-cap growth fund that focuses on companies that develop or publish video games, are involved in the streaming or distribution of video games and eSports, own eSports leagues or produce hardware. The fund holds a portfolio of roughly 40 companies that is fairly concentrated, with the top 10 holdings accounting for more than half of the invested assets. The fund's top holdings include Bilibili Inc. Sponsored ADR Class Z (BILI), the Chinese streaming company; Sea Ltd. (Singapore) Sponsored ADR Class A (SE), the internet platform provider; and Nintendo Co. Ltd. (7974:TKS), the consumer electronics and video game maker.

VanEck Vectors Video Gaming and eSports ETF (ESPO)

  • 1-Year Trailing Total Return: 96.1%
  • Expense Ratio: 0.55%
  • Annual Dividend Yield: 0.12%
  • 3-Month Average Daily Volume: 174,919
  • Assets Under Management: $839.9 million
  • Inception Date: October 16, 2018
  • Issuer: VanEck

ESPO is a large-cap growth fund focused on companies involved in gaming and eSports hardware, software, and development. The fund includes casinos and online betting companies as well. ESPO tracks the MVIS Global Video Gaming and eSports Index, a market cap-weighted index comprised of several dozen companies that derive at least 50% of their revenue from gaming or eSports. About a third of ESPO's holdings are U.S.-listed stocks, with others representing markets including Japan, China, and South Korea. The top holdings for ESPO include Tencent Holdings Ltd.; NVIDIA Corp. (NVDA), the graphics processing unit and hardware maker; and Bilibili, Inc. Sponsored ADR Class Z.

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