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Lesson 21: Metaverse ETFs

Lesson 21: Metaverse ETFs

Metaverse ETFs are a popular way for investors to be exposed to some of the most innovative technological developments around the globe.

ETFs have tried to offer investors exposure to the companies innovating in the automotive industry, robotics, the space economy, and non-fungible tokens (NFTs) but are a basket aimed at a multi-sensory virtual world more science fiction hype than investing common sense?

According to J.P. Morgan, the metaverse will likely infiltrate every sector in some way in the coming years, with the market opportunity estimated at over $1 trillion in yearly revenues.

There is quite a bit you should know before you dive in. If you want to invest in metaverse ETFs the right way, here is a quick guide that can help:

  • Research your Metaverse ETFsWhen choosing a metaverse ETF one should consider several other factors in addition to the methodology of the underlying index and performance of an ETF.
  • Define your strategy trading lets you speculate on the price movement; dealing lets you take direct ownership of the funds.
  • Take your positioncreate an account with us to start investing in Metaverse ETFs.

Let's explore the most popular Metaverse ETFs available for retail investors and ways to invest in Metaverse ETFs.

Free metaverse stock

What is Metaverse?

The metaverse is a term that was first introduced by science fiction books. It refers to a hypothetical version of the Internet that is accessible to all users using virtual reality (VR), and augmented reality (AR). With the latest advancements in metaverse technology, users can already get a taste of what this technological immersion feels like. Web3, the concept of a decentralized internet, is often used as the base of one future interconnected metaverse.

However, you must know that there is no unique metaverse just yet, but a bunch of 3D gaming platforms that allow users to create avatars and exist within those virtual worlds. The most popular metaverses today are Fortnite, Decentraland, and The Sandbox. You’ll soon discover that these metaverses have an elaborate economy of their own that is supported by the blockchain. This means that most in-game items are NFTs and can be traded in and outside the metaverse.

What is metaverse ETF?

Metaverse ETFs are financial products designed to offer investors exposure to the Metaverse and metaverse-related businesses. These funds invest in international listed companies that offer services and products to help develop and maintain the infrastructure of the metaverse.

Investors choose to invest in ETFs to diversify their portfolios without having to research all potential stocks, and some of these funds are themed, such as metaverse ETFs.

So, Metaverse ETFs can be characterized as thematic ETFs. Thematic investing can be characterized as performance chasing with a narrative. The latter is apparent for metaverse ETFs as indicated by most of the major companies announcing metaverse strategies. Technology companies want to provide the software and hardware, while others want to engage with a younger audience.

Metaverse ETFs include some of the most prominent tech companies worldwide and allow investors easy access to this expanding market.

How to Choose the Right Metaverse ETF for You?

There are currently many Metaverse ETFs to choose from. Here are some factors you should always consider before selecting a Metaverse ETF to invest in:

  • Listed Securities: Each Metaverse ETF has a list of securities it invests in, and you should always explore all the securities listed. Be on the lookout for the lead innovators in the Metaverse, including Meta, Roblox, and NVIDIA, among others.
  • Liquidity: You should look at the daily traded units of the Metaverse ETF in volumes and the liquidity of the individual securities.
  • ETF Focus: Ensure that you fully understand the niche you are investing in
  • Management Fees: Different ETF funds come with different fees, and it is important to compare the different fees of the ETFs before you select the one you need to invest in.

>> Best ETFs 2023

The Most Popular Metaverse ETFs

We have selected ETFs that offer exposure to the technology, fintech, semiconductor, and gaming sectors, and their top holdings are market leaders that are set to explore and develop the metaverse.

  • Roundhill Ball Metaverse UCITS ETF (METV)
  • ProShares Metaverse ETF (VERS)
  • Evolve Metaverse ETF (MESH)
  • Horizons Global Metaverse Index ETF (MTAV)
  • Fidelity Metaverse UCITS ETF
  • 21Shares Decentraland ETP (MANA)
  • Franklin Metaverse UCITS ETF
  • HANetf ETC Group Global Metaverse UCITS ETF
  • L&G Metaverse ESG Exclusions UCITS ETF (USD Accumulating)

Roundhill Ball Metaverse UCITS ETF (METV)

Roundhill Ball Metaverse Exchange (METV), the first global metaverse ETF, has $863 million under management. METV was launched on June 30, 2021, and holds many of the most important metaverse stocks. Matthew Ball maintains the Ball Metaverse Index. The ETFs are based on this index. The metaverse ETF consists of approximately 80% US stocks and 20% stock from Asian companies.

The ETF is heavily invested in gaming platforms, computing components, cloud solutions, and social networks. The top 10 holdings account for more than 60% of the fund and include Roblox (RBLX), Apple (AAPL), NVIDIA (NVDA), Microsoft (MSFT), and Unity Software (U).

ProShares Metaverse ETF (VERS)

ProShares Metaverse ETF (VERS) also offers exposure to companies expected to be at the center of the metaverse. This ETF was launched in March 2022, and it is dominated (over 90%) by US-based companies. The ETFs follow the performance of the Solactive Metaverse Theme Index.

The ETF’s stock allocations include semiconductors, media & entertainment, software & services, technology hardware & equipment, and consumer durables & apparel.

Over 45% of the fund is concentrated in the top seven stocks, which include Kopin Corp (KOPN), an electronics manufacturer, Amazon (AMZN), Roblox Corp (RBLX), Vuzix Corp (VUZI), and Apple (AAPL).

Evolve Metaverse ETF (MESH)

MESH is Canada's first metaverse ETF. It offers investors access to a portfolio of actively managed companies that are involved in the metaverse's development. It is made up of companies from all over the globe, with a special focus on Asia and the United States.

The fund is comprised of approximately three-quarters of American businesses, the rest being comprised of Chinese, Japanese and Singaporean companies. It is similar to Roundhill but invests primarily in the technology sector. This fund includes many of the most well-known large-cap stocks, such as Meta, Autodesk, and Walt Disney.

This ETF is relatively new, so little information can be found about its past movements. It currently manages over $8 million. The greatest attraction of MESH is its equal weighting. It divides its total funds among all stocks that it invests in, so no one company can have a significant impact on its performance.

Horizons Global Metaverse Index ETF (MTAV)

The Horizons Global Metaverse ETF aims to duplicate the performance of the Solactive Global Metaverse Index. MTAV, a Canadian-based ETF, trades on Toronto Stock Exchange. This ETF is a new one in the space, and it has a very limited historical price performance.

Horizons is different than other ETFs in that it has a diverse sector allocation. It allocates approximately 25% of its funds to the technology sector, but it also splits the money equally among a wide range of sectors. It includes stocks from the digital payments industry, AR/VR, and stocks from gaming.

MTAV covers companies around the globe, but it has a stronger preference for stocks based in the United States. It holds large amounts of Google, Visa, Amazon, and other companies. Each of its holdings is given a roughly equal weighting. Its investment in a variety of sectors makes it probably less risky than other metaverses ETFs.

Simplify Volt Equity Web3 ETF (WIII)

The Simplify ETF is the first Web3 ETF on the market. Web3 and the metaverse are closely linked, and the ETF contains stocks in innovative companies that are operating in both industries.

The Simplify ETF was first released in January 2022. It aims to capitalize on the growth of the cryptocurrency market. The majority of the fund's assets are Web3 and Metaverse companies. 10% of the money is invested in the Grayscale Bitcoin Trust, which offers exposure to Bitcoin.

The Simplify ETF, like other ETFs on the list, is quite risky. The ETF is exposed to many new industries which are not proven, and difficult to predict their future performance. It does, however, give you exposure to high-growth industries, and investors may see rising prices in the future, but they might also drop fast at any given time.

Fidelity Metaverse UCITS ETF

This ETF invests in stocks with a focus on the metaverse, social and environmental stocks. The fund is reinvesting the dividends (accumulating). The total expense ratio amounts to 0.50% p.a.. The fund replicates the performance of the underlying index by buying all the index constituents (full replication). The ETF was created in August 2022 and is domiciled in Ireland.

21Shares Decentraland ETP (MANA)

21Shares' initial venture in the metaverse space was an exchange-traded product, which focused only on Decentraland. This product allows you to speculate on the success or failure of a particular metaverse and not the entire sector.

The ETP is listed on the Swiss stock exchange. It was launched in February 2022. The ETP only holds the MANA token and is therefore dependent entirely on its success. It is based on the idea that the Decentraland metaverse will attract more people and businesses to its coin and ETP.

This ETP is highly volatile as its price depends on the price of a single cryptocurrency. There's no guarantee that it will succeed long-term. Decentraland is a pioneering platform that has attracted companies like Nike and Binance to build inside it. This ETP is a great way to invest if you anticipate that trend to continue.

Franklin Metaverse UCITS ETF

This metaverse ETF tracks companies from around the world that interact or have operations within the metaverse ecosystem. The Franklin Metaverse UCITS ETF is reinvesting the dividends (accumulating).

The total expense ratio amounts to 0.30% p.a.. The fund replicates the performance of the underlying index by buying a selection of the most relevant index constituents (sampling technique). The Franklin Metaverse UCITS ETF is a very small ETF with 2m Euro assets under management. The ETF was created in September 2022 and is domiciled in Ireland.

HANetf ETC Group Global Metaverse UCITS ETF

The HANetf ETC Group Global Metaverse UCITS ETF invests in stocks with a focus on Metaverse. The dividends in the fund are reinvested (accumulating).

The total expense ratio amounts to 0.65% p.a.. The fund replicates the performance of the underlying index by buying all the index constituents (full replication). The HANetf ETC Group Global Metaverse UCITS ETF is a very small ETF with 5m Euro assets under management. The ETF was created in March 2022 and is domiciled in Ireland.

L&G Metaverse ESG Exclusions UCITS ETF

The L&G Metaverse ESG Exclusions UCITS ETF (USD Accumulating) is another fund that has a focus on the metaverse. The dividends in the fund are reinvested (accumulating).

The total expense ratio amounts to 0.39% p.a.. The fund replicates the performance of the underlying index by buying all the index constituents (full replication). The L&G Metaverse ESG Exclusions UCITS ETF is a very small ETF with 2 million Euro assets under management. The ETF was created in September 2022 and is domiciled in Ireland.

What companies are in a Metaverse ETF?

Metaverse ETFs hold companies of all shapes and sizes entering the metaverse in different ways, including household names like Walmart, Nike, Gap, Verizon, Hulu, PWC, Adidas, Atari, and others.

The best Metaverse ETFs, which are rebalanced frequently, may include:

  • Companies developing infrastructure essential to the Metaverse such as Cloudflare and Nvidia.
  • Gaming engines responsible for the creation of virtual worlds including Unity and Roblox.
  • Pioneers in content, commerce, and social for the Metaverse, such as META, Tencent, Sea, and Snap.

Top 3 constituents

Many tech companies are trying to get involved with the metaverse trend. Here are the few companies that have invested in the metaverse and are the top constituents of the above Metaverse ETFs:

The other is either creating a metaverse-like environment or providing infrastructure to support the building of the metaverse.

Meta Platforms (META), formerly known as Facebook, has a distinct advantage in the metaverse hardware industry with its Oculus headsets. Creating a digital universe that allows for real-time interaction, economic activity, and immersive experiences takes extensive research and infrastructure. Meta spends billions each quarter on its Reality Labs segment of the business. Mark Zuckerberg stated in 2021 that Meta was preparing for the logistical aspects of creating its metaverse.

Snapchat (SNAP) appears to be a social media platform and is less prominent in the metaverse space. However, its parent company is investing a lot of time into metaverse research. It spends hundreds of millions each quarter on maintenance, research, and development. This is the company's largest operating expense. The company plans to add virtual reality (VR), and augmented reality (AR) features to its software. Because high-quality VR/AR content is crucial to the metaverse. Snap's investment in content will ensure that its technology is widely used by other metaverse members.

Another potential metaverse company to consider is Nvidia ( NVDA). Metaverse companies are growing in popularity as they allow manufacturers to create digital versions of their real-life representations. This can be used to improve their processes and solve problems. None of this would be possible if AI software was not available. Nvidia, with Omniverse, is leading the charge for metaverse technology.

These are not the only companies investing in the metaverse. There are many other companies involved with the development of activities in this area that you should consider, such as:

  • Roblox (RBLX)
  • Unity Software (U)
  • Microsoft (MSFT)

Ways to invest in metaverse ETFs

There are two routes to investing in metaverse stocks: speculating on their prices using CFDs or buying the assets in the hope they increase in value.

Trading metaverse ETFs using CFDs

A CFD is a contract in which you agree to exchange the difference in the price of a cryptocurrency from when you first open your position to when you close it. You are speculating on the price of the market rather than taking ownership of the metaverse coins or stocks. If you open a long position and the cryptocurrency or stock or ETF does increase in value, you’ll make a profit, but if it falls in price, you’ll make a loss – the opposite is true for a short position.

Before you can start, you would need to open a CFD trading account.

Buying metaverse ETFs

This means that you take ownership of a portion of the company outright, with the intention of holding it with a brokerage and profiting if it increases in value.

Before you can start, you would need to open an investing account with a broker like CAPEX.com.

With a trading account, you can access all these assets within one account.

Each investor should research the available ways to invest in the metaverse before deciding what’s the best option for their situation. Remember that the metaverse and its assets are volatile assets, as it’s the case with crypto, and you shouldn’t invest more than you are willing to lose.

Some of the most popular metaverse investments are ETFs because these investments do not require the investors to get involved in the metaverse. Another advantage when investing in metaverse ETFs is that you can also use U.S. Dollars instead of cryptocurrency.

Should You Invest in Metaverse ETFs?

The metaverse may represent the next technological revolution after the internet and the mobile phone. Metaverse ETFs can be a way to invest in the future.

According to Fortune Business Insights, the global metaverse market size was valued at USD 100.27 billion in 2022 and is projected to grow to USD 1,527.55 billion by 2029, at a CAGR of 47.6%

Because this is a young industry, investors will experience some volatility. As always, investors should research the ETFs they want to invest in and check out the Metaverse ETF’s past performance. You might lose or gain when you sell your Metaverse ETF. This is because the investment return and principal value might fluctuate.

Large-cap tech companies make up the majority of the Metaverse, making their shares the most stable on the stock market. These include large media companies like Meta Platforms (Facebook) and large e-commerce firms such as Amazon.

However, in the case of the above Metaverse ETFs, performance is not there, which might explain the low amount of assets managed by these ETFs. Benchmarking the three ETFs that have some meaningful trading history to the Nasdaq highlights underperformance in the last 12 months.

If you’re looking for alternatives, look at ETFs that replicate a specific index or benchmark.

The ETF giants (SDPR, iShares, Vanguard, Invesco) investing in technology and healthcare have gained more than 500% in the last 10 years.

Free trading tools and resources

Remember, you should have some trading experience and knowledge before you decide to invest in ETFs. You should consider using our educational resources, like CAPEX Academy or a demo trading account. CAPEX Academy has lots of courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to become a better trader.

Our demo account is a great place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how ETF trading works – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.

FAQs

What Are the Advantages of Investing in Metaverse ETFs?

  • High-level risk diversification and high market price return
  • It does not require a lot of initial investment funds
  • Experienced professionals create funds
  • It does not require an in-depth market analysis
  • Favorable forecast for the segment

What Are the Disadvantages of Investing in Metaverse ETFs?

  • Investors do not control the composition of the fund
  • Additional fee for fund management when bought from a secondary market
  • Low growth potential compared to other stock investments

Where Can I Buy the Best Metaverse ETFs?

Buying and selling ETFs is a simple process like buying shares. Therefore, before investing in Metaverse ETFs, you must sign up with a brokerage firm like CAPEX.com. You can therefore buy metaverse ETFs or stocks that replicate the fund.

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