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Another Metaverse ETF PUNK Hits Market

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The Metaverse is a shared virtual 3D world, or worlds, that are interactive and collaborative. It is facilitated by the use of virtual and augmented reality. The concept became extremely popular in 2021 particularly since Facebook rebranded itself as Meta Platforms (FB).

With more and more companies from various industries joining the Meta bandwagon, it is clear that Metaverse will dictate the next generation of Internet sooner or later. It offers a significant investment opportunity for the coming years.

As a result, the ETF industry received its first-ever metaverse ETF, namely, Roundhill Ball Metaverse ETF (META - Free Report) on Jun 30, 2021 while the second ETF Subversive Metaverse ETF (PUNK - Free Report) hit the market on Jan 27, 2022. Let’s delve a little deeper into the new ETF PUNK.

PUNK in Focus

The Subversive Metaverse ETF is an actively managed fund that invests in globally listed securities that provide services and products, supporting the infrastructure and applications of the Metaverse. The fund will hold 55-65 stocks. It currently holds 62 companies from five sectors. The fund charges 75 bps in fees.

The top holdings are Roblox Corp (3.79%), Coinbase Global Inc (3.68%), Nvidia Corporation (3.56%), Sony Group Corporation (3.33%) and Block Inc. (3.10%). Information technology holds about 31 stocks while communication services (15 stocks), consumer discretionary (10 stocks), healthcare (4 stocks) and financials (2 stocks) occupy the rest of the fund.

How Does the Fund Fit in a Portfolio?

Bloomberg Intelligence expects the market opportunity for the metaverse to reach $800 billion by 2024 from $500 billion in 2020, based on its analysis and Newzoo, IDC, PWC, Statista and Two Circles data. The primary market for online game makers and gaming hardware may top $400 billion in 2024 while the remaining business will come from live entertainment and social media. Gaming, AR, VR create $413 billion primary market of Metaverse, per Bloomberg.

Per the factsheet of PUNK, VR and AR are now rapidly increasing in popularity, with big tech companies focusing on the Metaverse not just in gaming and computing but also in security and payment processing. We all know that cyber security is a need of the hour and payment processing is the future of transactions as the mode gained immense precedence during COVID-19-induced lockdowns.

Can PUNK Sustain?

Currently PUNK has got only one direct competitor, META. Both funds charge 75 bps in fees. Hence, from the expense ratio point of view, PUNK does not have any threats. PUNK has less company-specific concentration risks as META has about 45 stocks in its basket, which is lesser compared to PUNK. Moreover, PUNK apparently offers a more diversified sectoral approach than META.

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