Australia’s first ever eSports ETF has just joined the ASX
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On Thursday the ASX welcomed the first Australian fund to invest in the burgeoning professional video gaming sector, or eSports.
The VanEck Vectors Video Gaming and eSports ETF (ASX:ESPO) debuted on the ASX on Thursday, offering exposure to the larger global companies with market caps above $5 billion.
The fund’s top holdings include Nintendo, Tencent and Nvidia.
Van Eck managing director Arian Neiron told Stockhead it’s a pure play targeted approach – investors can’t get these names in a diversified basket in any other ETF or managed fund in Australia.
“The industry is very, very big and multi faceted. You’ve got video games publishers, distributors, all the way to esports leagues. This is really big business,” he says.
There were 2.7 billion esports players globally, which compares favourably to Netflix’ 90 million subscribers, Neiron says.
“We consider this a real structural growth trend – this is not a fad.”
The esports ETF was one of four that debuted on the ASX today. This takes Van Eck’s total ETFs to 25, up from 19 a year ago.
Another ETF making its debut today was the VanEck Vectors Global Healthcare Leaders ETF (ASX:HLTH).
Neiron was particularly excited about the healthcare leaders ETF, noting health was a defensive sector.
“Healthcare is one equity sector that if you look at most drawdowns relative to other sectors it does far better — but why is that? It’s a basic need.”
Neiron noted that COVID-19 made the need for health care more pronounced, but structural growth thematics in the sector such as an aging population and increased health expenditure in developing countries also made it compelling.
But he wouldn’t pick just any company in the sector.
“We think in healthcare, you’ve got to be prudent,” he says.
“[Go after the] companies that are growing earnings year on year, they’ve got the cash flow, their balance sheets aren’t littered with debt, and are offering investors a high return on invested capital.”
Neiron said the other two ETFs – the VanEck Vectors Morningstar World ex Australia Wide Moat ETF (ASX:GOAT) and the VanEck Vectors Morningstar Australian Moat Income ETF (ASX:DVDY) similarly looked to companies reasonable valuations with solid footing.
The wide moat ETF was based around legendary investor Warren Buffet’s idea of ‘wide economic moats’.
Buffet’s idea of a company’s moat in general terms is a company asset acting like a castle that can defend it from competitors. This could be any asset ranging from physical capabilities to its reputation.
“These are companies that have long term sustainable advantages over a 10-20 year period, they have stable earnings, they’ve got strong balance sheets, high returns on capital,” Neiron says.
“The GOAT – is global wide moats, they invest in 50-100 wide moat companies but the most attractively priced.
“The whole idea around GOAT is you want a high conviction portfolio, high quality names but also factoring valuations because we think most investors are mindful of what price they pay.”
DVDY aimed to wean dividend hungry investors off Australia’s major banks and Telstra, which formerly had a solid reputation for dividends.
But COVID-19 has changed all that with all the big four banks cancelling or slashing dividends.
“COVID-19 has really exacerbated the fact that the dividends the banks have been offering aren’t the gift that keeps on giving in perpetuity,” he said.
“So particularly for retirees or those investors who’ve had to forcibly move up the risk ladder to equities away from the likes of cash and government bonds, we think being selective with your dividend payers as well as focusing on companies with a moat and strong financial health,” he said.
“We’re focusing on 25 companies that are highest dividend payers based on their moat rating as well as their strong financial health.”