Esports and Entertainment ETFs Target Millennial Investors
There are a growing number of exchange traded funds (ETFs) designed to attract millennial investors. Some of these ETF portfolios include entertainment, sportswear, and technology companies, and a growing number of ETFs including gaming and esports businesses.
ETFs can be a viable alternative to investing directly in the shares of a single company. Investing instead in a “basket” of companies spreads risk and can combat market volatility.
The Globe and Mail, in a recent report, points to funds like Global X Millennials Thematic ETF (MILN) and Principal Millennials Index ETF (GENY). These ETFs are investments in the stocks of numerous companies, like Apple, Disney, Adidas, Spotify, Facebook, and Uber. And, could be of interest to millennials, those born between 1980 and 2000. However, some believe funds that include such technology and consumer reliant stocks only can still be too volatile, especially during market downturns. Others see them as a long-term bet. Michael Kovacs, chief executive of Harvest Portfolios Group says:
“You have to take the position that whatever tech stock you’re investing in will be bigger 10 years from now than it is today, and you make your investment and you wait.”
An Accenture study says spending by millennials alone could reach $1.4 trillion in the US by 2020 and account for 30% of total retail sales. It’s not surprising that traditional investment products, like ETFs, are being targeted to such a high spending demographic group. But, millennials, though interested in technology, gaming, and esports perhaps aren’t the first to consider an ageing realm of stocks and shares.
Do millennials prefer investing in cryptocurrency and watching and playing esports instead?
A 2018 survey by Blockchain Capital found 30% of 18 to 34 year olds would rather invest $1,000 in Bitcoin than bonds or stocks. CCN, in May 2019 cited Nate Geraci, president of the ETF Store, as saying his millennial clients want to hold Bitcoin in their investment portfolios over traditional assets like gold. Geraci told Bloomberg:
“If you talk to, primarily millennials, and ask them which they prefer, bitcoin or gold, it’s a landslide. It’s not even close, it’s like 90% prefer bitcoin.”
Cryptocurrency, or bitcoin, ETFs are yet to get off the ground as many regulators are hesitant to allow products based on such a hugely volatile and so far, unregulated market.
Many millennials are investing in cryptocurrencies directly, by buying the coins on exchanges. Bitcoinist, in October 2018, reported that as many of a quarter of millennials already owned cryptocurrencies and another third were “interested.”
Cryptocurrencies are certainly a popular alternative investment for younger generations. But traditional investment portfolio managers are striving to keep up by providing products to attract millennials. The, soon to be, $3 billion dollar esports and $300 billion video gaming industries already garner millennials attention for entertainment.
ETFs may have their place too, and now include esports
Another report this October, by Investopedia, introduces ETFs focused on video gaming and esports. The first gaming ETF launched in 2016 but is proving a popular. VanEck has now launched an ETF more focused on both esports and video games called the “VanEck Vectors Video Gaming and esports ETF.” It tracks an index of 25 companies in the sector. Michal Cohick, VanEck’s director of ETF product marketing, says its new product is “an opportunity to invest in the future of sports. Roundhill Investments has created its NERD ETF which also targets 25 or more esports and digital entertainment companies including Turtle Beach and Activision Blizzard.
Interestingly, of millennials who invest in stocks and shares, Charles Schwab Corporation finds ETFs are more popular than buying individual securities. And, according to its study, nearly 80% of millennials see ETFs as their “primary investment vehicle” with 74% planning to increase their ETF investments.
The rapid growth in popularity of esports and the industry’s success is likely to lead to more esports, as well as entertainment and technology, ETFs. Though millennials like alternative investments such as cryptocurrencies, many could choose these funds too. They may have to be a little patient with market volatility and look long-term for the best return. Even Activision Blizzard, which invested $50 million into its esports business last year, is expecting its profit results on a ten-year horizon.