Video Games & Trade Wars

USA

Trade War ETF, and IP smart beta

Vident Financial, a Georgia-based $5 billion ETF provider, is listing three new smart beta ETFs, targeting companies with solid intellectual property.

  • Innovation Alpha Global ETF (INAG)
  • Innovation Alpha United States ETF (INAU)
  • Innovation Alpha Trade War ETF (TWAR)

INAG and INAU use the same methodology, for global and US companies respectively.

They both track indexes that weight companies by “innovation ability”, the prospectus says. Innovation ability is assessed by a companies’ global IP, like patents and trademarks, and other intangible assets, like licenses, permits and designs. More deeply, the funds judge innovation ability by looking at the degree to which companies’ IP is legally enforceable and how much it gets used. While also comparing competing companies IPs against each other. 

INAU will hold 100 companies; INAG will hold 120. Both limit the turnover in annual rebalances to 10% of the portfolio to lower transaction costs. The funds charge a steep 0.81%.

TWAR starts out similarly to the other two funds, looking at companies’ IP. But then takes an extra step of “identifying the extent to which each company is expected to be affected by a trade war”. This primarily involves seeing how much “government patronage” a company receives: the more the better. 

Another Video Games ETF

Roundhill Financial, a Delaware-based startup, and Exchange Traded Concepts are listing a new computer games ETF, in what is becoming a popular theme. The Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD) tracks an equal weight index of companies involved in computer games and online entertainment. The index will be provided by BitKraft, which is also an investor in Roundhill.

NERD will invest in companies that make their money from computer games. Companies in the index are separated into three categories, based on how much money they make from the sector.The three categories are “Pure-Play”, “Core” and “Non-Core” – progressing from the most involved in video games to the least involved.

Subject to minimal size and liquidity requirements, companies are chosen based on a key-word search of regulatory filings, analyst reports, and industry-specific trade publications. The index will consist of a minimum of 25 components upon each rebalancing.

One imagines, as is often the case with thematic ETFs, that the weightings of each category will be tiered: with pure-plays getting the most weight in the index. Although I cannot see any information on this in the prospectus.

The fund charges 0.50%.