Owing to the malaise in growth stocks through much of the first half of this year, thematic exchange traded funds encountered some headwinds, but investors remained undaunted.
Perhaps sensing opportunity, market participants continued embracing thematic ETFs in the first half of the year. By the end of May, globally listed thematic funds had a record $414 billion in assets under management after hauling in $1.57 billion in the fifth month of the year.
Unto themselves, thematic ETFs, broadly speaking, qualify as “nifty” and one of the nifty things about this landscape is that there's always a new investable segment emerging, giving issuers latitude with which to bring new funds to market.
Of course, not all of those ETFs will be successful and not all are worth of advisor/client conversations let alone client dollars. One that could very well prove to be on the more positive side of the ledger is the Roundhill Ball Metaverse ETF (NYSEARCA:META), which debuted on June 30.
META May Be Magnificent Idea
For the uninitiated, and there's likely plenty of us out there, the metaverse is a concept that expands upon the internet. Think of it as a next step in the evolution from 1990s-style internet (hardline) to the mobile web of today.
The metaverse isn't necessarily complex, but it is deep and with that depth comes an array of investment implications and opportunities, shining a light on META as a practical, tactical allocation for growth-oriented clients that want exposure to a potentially lucrative theme.
“The Metaverse will be comprised of countless persistent virtual worlds that interoperate with one another, as well as the physical world, and generate a robust economy that spans labor and leisure,” according to Roundhill resarch.
The metaverse has the potential to dramatically change the landscape for familiar, prosaic industries including education, financial services, healthcare and more. For advisors, the metaverse investment case becomes easier to explain when examining the Ball Metaverse Index – META's underlying benchmark.
That index “consists of a tiered weight portfolio of globally-listed companies who are actively involved in the Metaverse” with classifications including computing, networking, virtual platforms, interchange standards, payments, content, assets and identity services and hardware.
That's a lot of moving parts, but there's no getting around exponential growth trajectory the metaverse is on. A subdued estimates revenue from virtual worlds will reach $400 billion by 2025. Bloomberg Intelligence puts the metaverse opportunity set at $800 billion by 2025 and that forecast excludes the compute, hardware, networking and payments categories in META. Split the difference and its $600 billion – well ahead of today's level of $180 billion.
More Conventional Than Meets the Eye
Thematic investing can take clients to some unusual places via some unusual, occasionally dubious companies. Fortunately for advisors and clients, META isn't a fly-by-night operation and its holdings prove as much.
The new ETF is home to 49 stocks with a median market capitalization of $74.3 billion, which is firmly in large-cap territory. Large-cap thematic strategies are often more practical and easier to convey to curious but skittish clients.
Further allaying potential concerns is the fact that META's roster is chock full of familiar names, including Nvidia (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and Qualcomm (NASDAQ:QCOM).
Those are good places to start when discussing META and its potential inclusion (likely on a satellite basis) in the portfolios of risk-tolerant clients.
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