It’s a billion-dollar industry, but you may not have even considered getting exposed. It’s called e-sports, and if you have even a passing interest in online gaming or video game consoles, you’ll know that it’s gaining in popularity — and fast. However, while the U.S. can boast any number of retail and tech stocks that are related to the growing gaming industry, the TSX arguably has next to no exposure to it at all.
Well, that’s all about to change, and soon. As of tomorrow, Canada’s first-ever dedicated e-sports and e-gaming ETF will begin trading on the TSX. Evolve E-Gaming Index ETF (TSX: HERO) will provide investors with what is essentially a pure-play e-sports stock, giving them unprecedented access to domestic and international electronic gaming companies. It’s an exciting time to be a fan of gaming stocks, so let’s take a look at what’s on offer.
And then a HERO comes along…
Having launched its first raft of thematic ETFs back in September 2017, Evolve Funds Group manages assets valued at over $485 million and has become the country’s fastest-growing ETF provider. Its innovative funds are tailored towards long-term investment themes with a focus on index-based income strategies and giving investors access to seasoned investment managers.
The president and CEO of Evolve Raj Lala had this to say about the new ETF: “The launch of HERO marks an opportunity for Canadian investors to participate in another innovative sector positioned for exponential global growth. The momentum behind e-gaming signifies a cultural shift in entertainment with 2.2 billion gamers globally.”
Lala went on to add that “almost 500 million people are expected to watch e-gaming events, leading to supplemental revenue sources for the industry from areas such as media rights and sponsorships. This year, the industry is forecasted for growth upwards of 38%.” It’s easy to see why tech stock fans are getting excited about the sector and why a thematic gaming ETF is potentially such a big deal.
Until now, the closest thing a Canadian investor could get to direct investment in e-gaming was to stack shares in graphics processor producers Nvidia and retailer GameStop. However, Nvidia belongs to the volatile semiconductors sector, while the struggling GameStop is, by all accounts a falling knife, so neither seemed a perfect option.
The benefit of an ETF is that they are usually lower risk, spread out as they are across a range of thematic assets. However, they tend not to pay higher dividends than direct investments in a single company. This may not be the case here: Nvidia currently pays its shareholders a meagre dividend yield of 0.43%, while GameStop has suspended its dividends altogether. In other words, Evolve E-Gaming Index ETF may have little competition in this space.
The bottom line
With a billion-dollar gaming industry to play for, Canadian investors will finally have direct access with this exciting new ETF. It will certainly be interesting to see how the Evolve E-Gaming Index ETF performs on the TSX after it goes live tomorrow.
