Best Metaverse ETFs UK to Watch
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A rising number of companies are expanding their offering into the metaverse world. Whether it’s software companies providing the ability to create 3D virtual worlds, hardware companies providing virtual reality and augmented reality devices to connect to the metaverse or retailers selling virtual goods for the metaverse. With that being said, let’s look at some Metaverse ETFs that are available to UK investors.
Popular Metaverse ETFs in 2022 Amongst UK Traders
Below is a quick list of popular metaverse ETFs based on trading volume. These ETFs, or exchange traded funds, will invest in a variety of technology companies that are involved in the metaverse.
A Closer Look at Metaverse ETFs
In this section, we go through each metaverse ETFs listed above in more detail.
1. Amplify Transformational Data Sharing ETF
The Amplify Transformational Data Sharing ETF (BLOK) is an exchange traded fund that invests in companies involved in blockchain technology, cryptocurrency and the metaverse. The fund was launched in 2018 and surged more than 220% higher to record an all-time price of $64.91 in November 2021.
The fund invests at least 80% of its net assets in securities that are actively involved in the development and utilisation of blockchain technologies. Its ten holdings include Silvergate Corp, SBI Holdings, CME Group, NVIDIA Corp, GMO Internet, Coinbase Global, Galaxy Digital Holdings, MicroStrategy, Digital Garage and Hive Blockchain Technologies.
Most of the companies the fund invests in are located in North America. However, there are also equity holdings in Western Europe and the Asia Pacific. The fund has 46 total holdings and an expense ratio of just 0.71%.
The share price of the Amplify Transformational Data Sharing ETF has been fairly rocky since its inception. After launching in 2018, the fund’s price rallied to a record high of $64.91 in November 2021. However, since reaching this price the fund has fallen 50%.
The fall lower in the fund’s share price is in line with the broader market. At the beginning of 2022, global stock market indices crashed lower due to the threat of rising interest rates and the Russia invasion of Ukraine. All risk assets declined during this period including stocks and even the cryptocurrencies.
The stocks held in the fund are a mixture of large cap, mid cap and small cap stocks which means there is a range of companies at different stages in their development with regards to diversification.
2. ProShares UltraPro QQQ ETF
The ProShares UltraPro QQQ ETF has an aim to provide results that correspond to three times (3x) the daily performance of the Nasdaq 100 index. The index itself tracks the performance of the 100 largest companies listed on the Nasdaq Stock Exchange.
These include some significant players in the metaverse such as Meta, NVIDIA (NVDA), Microsoft (MSFT), Amazon, PayPal, Alphabet, Match Group, Advanced Micro Devices, Activision Blizzard, Pal Alto Networks, Electronic Arts and many other tickers listed on the NYSE and Nasdaq Exchange.
Most technology companies have announced plans to enter the metaverse either directly or indirectly. Some companies provide the software for developers to build virtual 3D worlds. Gaming companies such as Activision Blizzard and Electronic Arts already have a metaverse with gamers interacting in online virtual games and buying in-game products.
Companies such as Mark Zuckerberg’s Meta Platforms Inc (formerly Facebook) provide access to hardware to access the metaverse through its Oculus Quest virtual reality and augmented reality headsets.
The fund is 3x leverage. This means the gains and losses of the Nasdaq 100 index will be three times as much each day.
The Nasdaq 100 stock market index rallied more than 150% from the low of the pandemic in March 2020 to the record high in November 2021. Over the same period, the ProShares UltraPro QQQ ETF rallied more than 1,020%.
One thing to bear in mind is that the ProShares metaverse ETF is not a direct metaverse play. While most of the Nasdaq 100 index stocks the fund tracks are likely to benefit from the metaverse, there are some stocks in the index that have yet to move into the virtual world.
There are a few biotechnology companies in the fund which are not yet in the metaverse. But, this is likely to change over time with some Asia biotech startups embracing the metaverse. Therefore, the ProShares metaverse ETF is currently considered to be a more diversified play.
3. Vanguard Information Technology Index ETF
The Vanguard Information Technology Index ETF tracks the performance of a benchmark index that measures the investment returns of a basket of information technology stocks and thereby companies involved in the metaverse. The index it tracks is the MSCI US IMI Information Technology 25/50 Index.
The fund currently holds 360 stocks across large cap, mid cap and small cap sectors and has a median market cap of $378.7 billion. 24.30% of the fund is held in technology hardware companies with 21.70% in systems software companies. The rest of the funds are diversified into 11 other information technology sectors.
The 10 holdings of the fund include some heavyweights of the metaverse. Microsoft is the second biggest holding of the fund. The company recently acquired Activision Blizzard for $75 billion as it looks to corner the metaverse gaming space. The third biggest holding of the fund, NVIDIA, is already producing products for its virtual shared space the Omniverse.
Even payment provider companies are planning to enter the metaverse. The fourth and fifth holding of the Vanguard Information Technology Index ETF is Visa and Mastercard. Both of these companies have big plans to invest in metaverse startups. Mastercard has already partnered with Coinbase to provide NFTs which can be used in the metaverse.
The fund’s eighth holding, Cisco Systems, has also announced plans to enter the metaverse and has big plans that it could reinvent its Webex meeting software. They have already invested in augmented reality hologram technology for it.
Perhaps most interesting is that the fund has only sold off around 20% from its record high in December 2021.
4. Fidelity MSCI Information Technology Index ETF
The Fidelity MSCI Information Technology Index ETF is another fund that tracks the well-performing companies in the information technology sector which includes companies involved in the metaverse. The fund only focuses on information technology companies in the United States.
The fund launched in 2013 and has racked up gains of more than 450% until its record high which was reached in the last week of trading in 2021. The fund also has a low expense ratio of just 0.08%. 32.91% of the fund is invested in software companies, with 23.87% invested in technology hardware and 20.64% invested in semiconductor stocks. The rest of the fund is allocated to IT services and electronic and communication companies.
The 10 holdings of the fund include some major heavyweights of the metaverse such as Cisco Systems, Mastercard, NVIDIA, Microsoft and Advanced Micro Devices (AMD). Perhaps the most interesting holding is the semiconductor company AMD. This is because Meta (formerly Facebook) plans to use AMD chips to power the metaverse.
Meta runs the fourth largest data centre in the United States after Amazon’s AWS, Microsoft’s Azure and Google’s Cloud. The data centre is essential in building the metaverse. Both Meta and AMD have been collaborating to build the Epyc chips which are used to run its data centre and metaverse.
The Fidelity MSCI Information Technology Index ETF has had an impressive performance since its inception in 2013. While there have been periods of decline, most notably in 2015, 2018, 2020 and at the beginning of this year – they have all been in line with the broader market.
However, the declines have been much less than those of broader stock market indices such as the Nasdaq 100 or S&P 500 index.
Conclusion
Metaverse ETFs provide diversification and simplicity to gain exposure to the metaverse. There are a range of different Metaverse ETFs for beginners to choose from that all have their own unique features.
Frequently Asked Questions on Metaverse ETFs
Does vanguard have a metaverse ETF?
What stocks are in the META ETF?