Metaverse funds top $2bn as Fidelity, LGIM, Franklin chase ‘theme du jour’


Funds that invest in the metaverse now manage more than 2 billion. USD globally, as a flurry of launches from some of Europe’s biggest asset managers looks to capitalize on a hot investment trend.

Data from Morningstar, provided to financial news, shows a sharp increase in assets managed by funds focused on immersive virtual worlds, as well as in the number of new products launched over the past 12 months.

There were 39 metaverse funds overseeing just over $2 billion in assets. worldwide at the end of July, according to Morningstar, up from $179 million. across just six funds at the end of August 2021.

The total assets peaked at DKK 2.6 billion. USD at the end of March, but has since declined.

Investors have plowed nearly $500 million into metaverse funds so far this year, with the world’s largest managed by US-based Roundhill Investments.

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The bumper haul comes as powerhouses including Fidelity International, Franklin Templeton and Legal & General Investment Management all launched metaverse exchange-traded funds targeting European investors in the past month.

Earlier this year, Goldman Sachs said the market could grow to around $8tn.

“The metaverse has become one of the themes du jour,” said Kenneth Lamont, senior analyst at Morningstar.

Franklin’s metaverse ETF tracks the Solactive Global Metaverse Innovation Net Total Return Index, which is comprised of companies that have or are expected to have significant exposure to the metaverse and those that support blockchain technologies.

Dina Ting, head of global index portfolio management at Franklin Templeton, said big technology companies are starting to focus on the metaverse “for their next big area of ​​development in the same way that many did at the dawn of the internet”.

“We believe that investing in the metaverse and its increasing sophistication bodes well for the next iteration of the Internet, which can have a profound impact on society and global economic growth,” Ting said.

Meanwhile, LGIM, the UK’s largest asset manager, launched its Metaverse ESG exclusion ETF.

LGIM said the fund offers investors exposure to “innovative companies developing and driving revenue from the core technologies needed to deliver the metaverse, the Internet’s next frontier”.

This includes a focus on high-performance computing and data as well as the so-called internet of things and augmented and virtual reality.

Fidelity, LGIM and Franklin aren’t the only asset managers who have a positive view of the metaverse.

BlackRock – the world’s largest fund manager – is also optimizing opportunities.

“We know it’s going to be big and it’s going to change people’s daily lives,” Nigel Bolton, chief investment officer of BlackRock Fundamental Equities, wrote in a January report.

However, despite growing enthusiasm among fund managers, Morningstar’s Lamont warned investors “should look beyond a strong narrative” when choosing thematic funds, as there is no market standard for how themes should be defined or tracked. Each thematic fund has a different approach, he said.

“Even funds that claim to track similar themes can have surprisingly little overlap in holdings,” he said.

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“The wide range of approaches gives investors the freedom to choose the most suitable solution for themselves, but also creates an additional due diligence and ongoing monitoring burden.”

Chris Chancellor, senior director of global insights at data provider Broadridge, said there was increased interest among fund pickers to gain exposure to the metaverse.

“The majority of their comments indicate some interest, but there are also those who worry that this is too narrow and a fad,” Chancellor said.

“Overall, constituents like innovation and fund flows show that new funding is extremely important to the industry – especially in difficult years.”

Chancellor questioned whether metaverse funds would generate “big flows this year,” with the big thematic winners more likely to be funds focused on clean energy, food and infrastructure.

“However, new ideas that capture the imagination and give distributors new angles to discuss with customers are always welcome – the key for managers will be to show that this is a theme that can continue and has enough investment work to be diversified, ” he said .

To contact the author of this story with feedback or news, email David Ricketts

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