DEFINITION of 'Gaming Industry ETF'

Gaming Industry ETFs are funds that invest in leisure companies for the purpose of generating returns equal to an underlying index. Standard gaming funds track companies that generate revenue from the casino gaming industry, video game sector or other forms of entertainment. Its success is tied to the health of the economy and consumer discretionary sector.

In periods of strong economic growth, consumers are more likely to spend on discretionary items like games or gambling, but when conditions worsen, consumption tends to pullback as well. 

BREAKING DOWN 'Gaming Industry ETF'

Gaming Industry ETFs often hold stocks in international and domestic gaming companies. For example, the VanEck Vectors Gaming ETF (BJK), a thematic fund of casino companies, consists of major US casinos such as Las Vegas Sands (LVS) and MGM Grand (MGM) as well as large international holdings like Galaxy Entertainment Group. Most casino companies generate a large portion of revenue from two major markets: Las Vegas and Macau. The two regions play an equal role in the outcome of the casino industry. 

Video games are another sector covered by gaming funds. It is the fastest-growing space in the entertainment industry, reaching a large audience than TV and movies combined. The rising popularity of eSports has translated to significant returns for stocks in the video gaming industry. This additional layer of future revenue also means continued growth for the foreseeable future. In early 2016, PureFunds launched one of the first video game themed fund based on the EE Fund Video Game Index. It consists of some well-known technology companies like Activision (ATVI) and NVidia (NVDA) in addition to companies incorporated overseas. Since inception, the ETF is up over 100% due to greater adoption of eSports, virtual reality, and new gaming systems. 

Gaming industry ETFs offer investors the same benefits as a traditional exchange-traded fund: lowest costs, greater transparency and flexibility, and tax efficiency. They are traded on most major exchanges during normal trading hours and support selling short or buying on margin.

Risks of Gaming Industry ETFs

The gaming industry has witnessed explosive growth in recent years, but all investments have risks. Targeting the video game or casino industries is a bet on the consumer discretionary sector. If consumers have more disposable income, they often spend it on recreation and leisure activities. In the event of a downturn, though, consumer discretionary spending loses favor to necessary items. The casino sector also must pay attention to conditions in Las Vegas and Macau, where companies in the sector generate a large share of sales.

  1. eSports

    ESports mimics the experience of watching a professional sporting ...
  2. Casino Finance

    Casino finance is a slang term for an investment strategy that ...
  3. John Harsanyi

    John Harsanyi was an economist and co-winner of the 1994 Nobel ...
  4. Iterated Prisoner's Dilemma

    Iterated prisoner's dilemma is played repeatedly by the same ...
  5. Facebook Credits

    Facebook credits were a virtual currency which could be used ...
  6. Gambling Income

    Gambling income is income as a result of games of chance or wagers ...
Related Articles
  1. Tech

    How To Game The Video Game Industry

    Investopedia explores the business, current developments, future trends of video games industry and how the overall industry makes money.
  2. Tech

    How The Video Game Industry Is Changing

    Video game creation has become increasingly complex, and the cost of creating a game to run on one of the major consoles has risen with this greater complexity.
  3. Investing

    5 Video Game Stocks to Power up your Portfolio

    Learn about some of the biggest players in this multibillion dollar industry!
  4. Tech

    You Love Video Games, But Do You Know How The Industry Works?

    Traditionally, the video game industry was limited to consoles, such as Microsoft’s (MSFT) Xbox and Sony’s (SNE) PlayStation, but it now includes PC games, mobile games and, in the near future, ...
  5. Small Business

    Three Companies That Will Benefit From Online Gaming

    Certain companies stand to benefit from the increasing popularity of the online gambling industry in the U.S., as well as its expanding legalization.
  6. Insights

    The Evolution Of The Gaming Market

    The gaming market has a rich history in America, from lotteries in colonial settlements and card games in old west saloons to today's multibillion-dollar casino industry.
  7. Tech

    First-Ever Video Game ETF Launches

    An ETF focused on the video game industry was launched yesterday.
  8. Investing

    Gaming Stocks to Watch in 2017 (ATVI, NTES)

    2016 was the best year in history for the video game industry. Will 2017 be even stronger?
  9. Investing

    Power Up Your Portfolio With Video Game Stocks

    Level up your winnings by investing in this fast-paced, highly skilled industry.
  10. Insights

    Investors May Love the Fast Action in Video Games

    Video game companies that were once whipsawed by the "ship it and forget it" game cycle, are now thriving as they sell their games digitally.
  1. Why is game theory useful in business?

    The concepts of game theory became a revolutionary interdisciplinary phenomenon, but they are still relevant for business ... Read Answer >>
  2. What are some examples of the law of demand in real markets?

    Find out how the price of a good or service affects the quantity demanded, and explore instances of consumption reflecting ... Read Answer >>
  3. How does market risk differ from specific risk?

    Learn about market risk, specific risk, hedging and diversification, and how the market risk of assets differs from the specific ... Read Answer >>
  4. Who's in charge of managing exchange-traded funds?

    An exchange-traded fund (ETF) is a security that tracks an index but has the flexibility of trading like a stock. Just like ... Read Answer >>
Trading Center