What’s the Metaverse? The Answer Depends on the ETF
Metaverse enthusiasm is spreading—slowly—in the exchange-traded fund industry. Part of the reason for the slow uptake may be because, from an investing perspective, no one can agree on what it is.
No fewer than six ETFs exist with “metaverse” in their name. And that’s about all they share regarding portfolios. While each fund offers its own angle, they collectively hold only three stocks in common: Apple Inc., Snap Inc. and Take-Two Interactive Software Inc.
The seven ETFs, their assets under management and their inception dates are as follows:
Roundhill Ball Metaverse ETF (METV), 6/30/2021, $488.8 million
Fount Metaverse ETF (MTVR), 10/27/2021, $7.1 million
Subversive Metaverse ETF (PUNK), 1/27/2022, $595,860
Proshares Metaverse ETF (VERS), 3/15/2022, $6.6 million
First Trust Indxx Metaverse ETF (ARVR), 4/19/2022, $2.5 million
Fidelity Metaverse ETF (FMET), 4/19/2022, $12.8 million
Global X Metaverse ETF (VR), 4/26/2022, $2.1 million
Roundhill’s METV leads the pack regarding size, and it was the first out of the gate, launching several months before the next entrant and gathering almost $489 million in assets. The smallest is PUNK, with less than $1 million in assets under management. The number of holdings in each fund ranges from 41 to 53 securities. All of the funds in the category except for PUNK track indexes.
Performance has been unimpressive. Year to date, METV and MTVR are down 44.86% and 33.5%, respectively, while the broad global market as represented by the iShares MSCI ACWI ETF (ACWI) is down just 18.93%.
Over the 12-month period, METV is down more than 45% compared with a loss of less than 18% for ACWI. Over the short term—the latest one- and three-month periods–metaverse funds and ACWI have performed similarly.
Year to date, almost all of the funds have seen modest inflows, except for the two funds that were listed prior to the start of the year. METV has seen outflows of nearly $26 million, while MTVR lost nearly $3 million.
Three Securities
The three stocks the metaverse ETFs hold in common may not on the surface appear to be metaverse stocks in the manner of Facebook parent Meta Platforms Inc., which is staking its future on the virtual industry.
Apple, simply due to its size and the scope of its business, is featured in myriad thematic ETFs, though usually with a capped weighting lest it dominate the fund. Snap, on the other hand, is primarily a social media company. Finally, Take-Two Interactive is a holding company that publishes video games under multiple labels.
Apple’s weights in the funds range from 3.55% in PUNK to 11.88% in MTVR. For Snap, the range is 0.46% in PUNK versus 3.79% in METV, while weightings in Take-Two range from 1.74% in VERS to 5.13% in VR.
Apple has a variety of metaverse-related initiatives, but has been fairly conservative in its approach to the space. An article from ComputerWorld notes that the company opted out of participating in the Metaverse Standards Forum, an organization dedicated to improving interoperability standards to create an open metaverse. the members include major names such as NVIDIA, Meta (formerly Facebook) and Adobe, as well as a number of standards organizations.
At least one venture capitalist and metaverse expert has accused Apple of hampering the development of the metaverse. Matthew Ball told CoinDesk TV that Apple doesn’t allow for crypto-based virtual worlds and limits its users’ access to the metaverse.
Meanwhile, Snap’s CEO Evan Spiegel told TheVerge.com that the term “metaverse” was ambiguous and hypothetical, and that the metaverse companies talk about in pitches doesn’t really exist yet. He indicated his firm is targeting augmented reality, which Spiegel says is actively being used by 250 million people daily on his firm’s Snapchat app.
Finally, the CEO of Take-Two, Strauss Zelnick has expressed skepticism about blockchain-based companies operating in the metaverse, though he believes strongly in the broader metaverse concept, noting his own firm has built strong metaverses in its games, according to Video Games Chronicle.
The fact that there is some ambivalence about the metaverse across the three companies that all the existing metaverse funds agree are representative of the space is interesting, and suggests the space is still establishing its identity. Although the metaverse is one of the hottest themes in conversation, the lack of definition may be an obstacle to growth for ETFs covering the category and the theme itself.
Contact Heather Bell at heather.bell@etf.com
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