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 November 16, the Consumer Discretionary Select Sector SPDR ETF (XLY) posted a 1-year trailing total return of 28.1% and the Communication Services Select Sector SPDR ETF (XLC) had a total return of 24.1%. This compared with a total return of 18.4% 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 HERO, ESPO, and BJK.
  • The top holdings of these funds are Sea Ltd., Tencent Holdings Ltd, and Flutter Entertainment PLC.

There are 4 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. As such, 2 of the 4 ETFs in this universe have been in existence for only about a year. The best gaming ETF, based on performance over the last year, is the Global X Video Games & Esports ETF (HERO). 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 November 18, 2020.

Global X Video Games & Esports ETF (HERO)

  • 1-Year Trailing Total Return: 74.3%
  • Expense Ratio: 0.50%
  • Annual Dividend Yield: 0.15%
  • 3-Month Average Daily Volume: 224,924
  • Assets Under Management: $413.7 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. It is one of the newer entrants in the world of gaming ETFs. 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 Sea Ltd. (Singapore) Sponsored ADR Class A (SE), the internet platform provider; NVIDIA Corp. (NVDA), the developer of graphics processing units and related hardware; 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: 72.6%
  • Expense Ratio: 0.55%
  • Annual Dividend Yield: 0.13%
  • 3-Month Average Daily Volume: 177,771
  • Assets Under Management: $591.6 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. (700:HKG), the Chinese internet service and product conglomerate; NVIDIA Corp.; and Sea Ltd.

VanEck Vectors Gaming ETF (BJK)

  • 1-Year Trailing Total Return: 10.8%
  • Expense Ratio: 0.66%
  • Annual Dividend Yield: 2.86%
  • 3-Month Average Daily Volume: 24,795
  • Assets Under Management: $59.3 million
  • Inception Date: January 22, 2008
  • Issuer: VanEck

BJK is a valuable option for investors looking for exposure to a narrow segment of the entertainment industry that includes casinos and other gaming corporations. BJK tracks the S-Network Global Gaming Index, whose components are global corporations that generate a minimum of 50% of their revenue from gaming and similar activities. While most of BJK's holdings are casino operators, it also includes sports and race book operators along with technology providers. Thus, BJK holds a wider breadth of equities than other gaming portfolios. Among the top holdings for BJK are Flutter Entertainment PLC (FLTR:DUB), the global sports betting and bookmaking company; Galaxy Entertainment Group Ltd. (27:HKG), the Macau-based resort, hospitality, and gaming company; and Las Vegas Sands Corp. (LVS), the casino and resort company.

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