The metaverse industry is relatively nascent and investment options in Canada are few. Since the world leaders in this sector are located in the United States or elsewhere in the world, some Canadian Exchange Traded Funds (ETFs) allow dealing with baskets of international securities.
The two oldest are the Horizons Global Metaverse Index ETF (MTAV, $17.83) and the Evolve Metaverse ETF (MESH, $6.33). Two more appeared in Canadian markets in May: the Fidelity Total Metavers ETF (FMTV, $10.27) and the CI Galaxy Metavers ETF (CMVX, $20.00).
“Investing in a Canadian ETF on the metaverse allows investors to avoid the hassles of currency conversion and greatly simplifies tax filing,” says Kaitlin Thomson, Vice President of Product Strategy at Evolve.
Evolve is also the only issuer that has opted for active management of its benchmark ETF for metaverses, while the other three replicate the performance of a benchmark index.
“We think the metaverse is still a very new concept for us to rely on as an indicator, which can put companies in the wrong categories,” she says. The Evolve ETF offers a basket of 28 large stocks, mostly from the US (75.6%) and China (13.5%).
According to her, companies should be divided into three categories: those that create virtual environments, such as Meta Platforms (META, $195.65), Microsoft (MSFT, $272.50), Roblox (RBLX, $31.44) and Activision Blizzard (ATVI). , $78.03), those who design software to create tools for creating the metaverse, such as Autodesk (ADSK, $207.17) and Unity Software (U, $44.32), and those who design hardware for use of virtual and augmented reality, another category in which Meta stands out Platforms.
Kaitlin Thomson explains that after selecting the companies that help create the metaverse, Evolve chooses index-based management for its portfolio, rebalancing all stocks to equal weight at the end of each quarter.
At Horizons, we selected passive management related to the performance of the Solactive Global Metaverse Index, which includes 50 companies with a maximum weighting of 5% per security and automatic rebalancing at the end of each quarter.
“The index seeks global exposure and wants to discover the leaders of today and tomorrow in the metaverse industry through machine learning. At the moment, we have significant exposure to the US market (78.1%). If this is where we have found leaders, then this is where we will invest. In two or three years, the picture could change,” explains Marie-Chantal Lauzon, Senior Vice President of Business Development at Horizons Canada.
The latter asserts that Horizons, with its metaverse ETFs, targets investors who are long-term betting and can withstand the volatility inherent in the stock market. “We specifically target those who believe the metaverse will disrupt technology in our daily lives,” she says.
The CI Galaxy ETF tracks the performance of Alerian Galaxy Immersive Digital Worlds hedged the Canadian dollar index, while the Fidelity ETF seeks to track the overall Fidelity Canada Metavers. The latter two are too recent to provide complete information on their stock selection.
A topic with great potential, but…
“The metaverse is a very macroeconomic topic that will determine how humans will interact with the Internet in the future. It’s a huge idea as an investment thesis, but it remains to be seen when and to what extent this phenomenon will take off, believes senior strategist and chief economist at iA Financial Group, Sebastian McMahon.
According to him, the metaverse will slowly and steadily evolve until a very popular app is released and entice early adopters to take the leap. Remember the launch of Apple’s iPhone (AAPL, $148.80) in 2007. It was apps like Angry Birds that drove demand, because a lot of people wanted to play. There would eventually be such an app in the metaverse and it would take off.
Sébastien McMahon believes that the entertainment industry will lead the show, especially the immersive game world, without neglecting the fashion industry. He believes that there is a market for virtual worlds where, for example, it will be possible to create an avatar and pay for special virtual designer clothes.
Kaitlin Thomson also argues that the video game industry will be a major component of the metaverse, but that technology has the potential to disrupt many industries, such as education: “Right now, in history lessons, students read books. But what would happen if they could put on the helmet of reality? The default is to transport themselves to different times to visit the pyramids of Egypt, for example? The classroom experience would be really different,” she says.
She also believes that technology can revolutionize, in particular, the way online concerts are presented, as well as virtual home visits.
Intended for those who help create metaverses
Sebastian McMahon, Chief Strategist and Chief Economist, IA Financial Group (Image: Courtesy)
“The metaverse has yet to be defined. We are not investing in the metaverse yet. We are investing in companies that are either contributing to the creation of the metaverse or that will be in a good position when it comes. But the interesting part of the curve is not there yet.”
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