Gaming in the form of video games, eSports, and online gambling has soared in popularity in recent years, especially since the start of the COVID-19 pandemic that caused many consumers worldwide to begin working or sheltering at home. 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.
- The gaming industry can be represented by both the consumer discretionary and communications services sectors. The first sector has underperformed the broader market and the latter has outperformed.
- The ETFs with the best 1-year trailing total return are BETZ, BJK, and HERO.
- The top holdings of these ETFs are class A shares of Score Media and Gaming Inc., Flutter Entertainment PLC, 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 has underperformed while the communications services sectors has outperformed the broader market in the past year. As of Aug. 27, the S&P 500 Consumer Discretionary Sector Index posted a 1-year trailing total return of 17.1% and the S&P 500 Communication Services Sector Index had a total return of 37.0%. By comparison the S&P 500 had a total return of 31.4%.
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 Q4 2021, based on performance over the past year, is the Roundhill Sports Betting & iGaming ETF (BETZ). We examine the top 3 best gaming ETFs below. All numbers below are as of Aug. 27, 2021.
- Performance over 1-Year: 64.2%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 0.23%
- 3-Month Average Daily Volume: 161,526
- Assets Under Management: $389.3 million
- Inception Date: June 4, 2020
- Issuer: Roundhill Investments
BETZ tracks the Roundhill Sports Betting & iGaming Index, which is designed to gauge the performance of the sports betting and iGaming industry. The ETF provides exposure to companies that operate in-person or online sports books, online gambling platforms, and companies that provide infrastructure or technology to the sports betting and online gaming industry. The fund is geographically diversified across a number of developed markets, though U.S.-based companies receive the largest allocation. It follows a blended strategy, investing in a mix of growth and value stocks across the market cap spectrum. The fund's top three holdings include class A shares of Score Media and Gaming Inc. (SCR:TSE), a Canada-based digital media company that provides sports media, betting, and eSports; class A shares of Rush Street Interactive Inc. (RSI), a gaming company that offers online casinos and sports betting; and class A shares of DraftKings Inc. (DKNG), a digital sports entertainment and gaming company that offers a fantasy sports platform.
- Performance over 1-Year: 31.5%
- Expense Ratio: 0.65%
- Annual Dividend Yield: 0.44%
- 3-Month Average Daily Volume: 28,680
- Assets Under Management: $127.6 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 Flutter Entertainment PLC (FLTR:DUB), an Ireland-based provider of mobile and online gambling services; class A shares of DraftKings; and Evolution AB (EVO:OME), a Sweden-based provider of live casino solutions to online casino operators.
- Performance over 1-Year: 11.8%
- Expense Ratio: 0.50%
- Annual Dividend Yield: 0.78%
- 3-Month Average Daily Volume: 138,683
- Assets Under Management: $557.8 million
- Inception Date: Oct. 25, 2019
- Issuer: Mirae Asset Global Investments Co., Ltd.
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 within competitive eSports leagues, or produce hardware for video games and eSports. The fund's holdings primarily operate within the communication services, information technology, or consumer discretionary sector. HERO also offers broad geographical diversification even though more than 60% of its holdings are of companies that are based in either 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 Electronic Arts Inc. (EA), a global video game company.
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