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Defiance's AUGR ETF Debuts as Video Gaming ETF (VIDG)

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Defiance ETF has repurposed its existing augmented and virtual reality  Defiance Future Tech ETF to tap the booming video games industry. Tracking the BlueStar Augmented and Virtual Reality Index, the fund could amass only $3.6 million in its asset base since inception in August 2018. Effective Jun 24, 2019, the AUGR started trading as Defiance Next Gen Video Gaming ETF VIDG (read: Video Gaming Industry Warming Up: Play These ETFs). 

VIDG in a Nutshell

VIDG seeks to track, before fees and expenses, the price and yield performance of the Bluestar Next Gen Video Gaming Index. Interestingly, 75% of the index is dominated by the companies engaged in the video gaming industry. Moreover, VIDG charges a fee of 30 basis points a year.

Per a Financial Advisor article, the BlueStar Next Gen Video Gaming Index comprises companies involved in developing and designing video games, interactive media and eSports streaming, video game consoles and gaming-focused cloud services. It also includes companies engaged in social media applications with augmented or virtual reality features, mobile or wearable devices enabling virtual or augmented reality along with video processing semiconductors and other semiconductors with applications in electronics for gaming or augmented and virtual reality, and online casinos. This market capitalization weighted index is rebalanced semi-annually.

What Makes Video Gaming an Attractive Space?

The global video gaming market is growing at an attractive pace. The advent of innovative technologies like augmented and virtual reality-based head-mounted and head-up displays is leading to the development of advanced games aimed at assisting in academics and skill development.

Moreover, the distribution of games on mobile and online has opened up market areas, creating demand in this niche space. Goldman believes that eSports, mobile gaming, subscription models, streaming services and significant penetration into Chinese market will act as long-term drivers for the industry. In fact, per a report by ReportLinker, the global video game market is anticipated to reach a value of around $179.1 billion, at a CAGR of 6.4% between 2019 and 2024.

ETF Competition

The fund faces moderate competition owing to its high focus on the video gaming industry. Here we discuss a few ETFs that seek to provide exposure to the same:

ETFMG Video Game Tech ETF (GAMR - Free Report) ) — Up 10.7% YTD

GAMR tracks the EEFund Video Game Tech Index, which follows companies actively involved in the electronic gaming industry, including the entertainment, education and simulation segments. The 86-stock fund has exposure to the afore-mentioned stocks but none of the stocks account for more than 2.77% of the fund. It charges 75 bps in fees (read: Least-Hurt Tech ETFs as China Hits Back).

VanEck Vectors Video Gaming and eSports ETF (ESPO - Free Report) — Up 23.4% YTD

The fund ESPO follows the MVIS Global Video Gaming and eSports Index, which intends to track the overall performance of companies involved in video game development, eSports, and related hardware and software. The 25-stock fund charges 55 bps in fees (read: eSports ETF Race: ESPO vs NERD).

Bottom Line

VIDG charges near the low-end in the growth-oriented funds category. Thus, we expect the fund to amass considerable assets in the coming days owing to its more concentrated exposure to the high-potential video gaming space and decent charges.

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