I think it's safe to say there's some excitement about the Roundhill Ball Metaverse ETF, ticker
symbol M E T A. Well, I spent a few days researching it and boy is it not what I expected. In this
episode, I'm excited to share with you everything I've learned about the Meta ETF, the way it's
managed, and how it compares to ARKW, ARK Invest's fund themed around the next generation
of internet applications. Your time is valuable, so here's the bottom line upfront: the Meta
ETF could be a serious winner, not because of which stocks are in it, but because of
who is managing it and how. Timestamps are enabled for your convenience and let's plug
right into it.
Let's start by taking a look at what's inside the fund. In my opinion, the top stocks are
exactly what we'd want to see representing the Metaverse in its infancy today: Nvidia
at almost 11%, Roblox at almost 10%, and heavy hitters like Microsoft, Meta Platforms, and
Unity Software to round out the top 5 stocks. These top 5 positions account for just under
40% of the fund. The big thing these 5 companies have in common is that they will all influence
the Metaverse in multiple ways. For example, Nvidia builds servers and supercomputers,
and also the chips that go into devices that connect to the Metaverse, like computers and
VR headsets. Also, through their Omniverse initiative, Nvidia also builds virtual platforms
for content creation and developing digital twins of physical assets. That's why it sits
at the top. Every company inside this ETF falls into at least one of a number of categories
of things that benefit the metaverse. Those categories are hardware, computing components,
networking, virtual platforms, data services, digital payments, and content creation platforms.
For computing components, we have stocks like Taiwan Semiconductor, Qualcomm, Apple, Intel,
AMD, and Skyworks. It's cool to see companies like Qualcomm and Skyworks in here to represent
the mobile device market instead of limiting this fund to stationary devices and servers.
For content, we have Roblox, Unity Software, Sea Limited for their Garena Platform, Take
Two Interactive, Electronic Arts, and Activision Blizzard. These are some of the biggest interactive
content creators, publishers, and distributors on the planet and often have a platform that
connects their various products. For example, in Roblox, every player is automatically given
an avatar, which is a human-like character, that is consistent across the more than 40
million experiences on their platform. They have an on-platform currency called Robux,
which is good inside any experience. They offer other connective features at the platform
level like cross-game chat, seasonal events and celebrations, virtual lobbies, and so
on. In my opinion, these cross-game, platform-level features that connect people while they're
inside different experiences are a stepping stone to a fully connected Metaverse.
Many stocks are in this fund for more than one reason, meaning they fit into more than
one of these categories. Sea Limited is on here not just because of gaming, but because
of the digital payments solutions that spun out of their Garena Platform to become Sea
Money. As you can see, plenty of fintech and e-commerce companies like Amazon, Sea Limited,
Coinbase, Alibaba, Square, and Paypal are in the META ETF. Amazon isn't just in it because
of e-commerce though, it's on the list because Amazon Web Services powers about a third of
the internet today and will surely power a significant portion of the Metaverse tomorrow.
The way positions are chosen and weighted in this fund is a little different than how
ARK Invest does it and I actually really like how it's done. Let's jump over to the fact
sheet for some context real quick and then I'll show you what I mean. Roundhill directly
references ARK Invest's 2021 Big Ideas report, which I also reference when I cover the Metaverse.
That's I'm comparing this fund to ARKW. The market opportunity for the metaverse in video
games alone is expected to roughly double in the next 5 years. That's around a 15% compound
annual growth rate. According to ARK Invest, revenues from virtual worlds like Roblox and
others, are expected to double over the next 5 years as well. Putting that together with
Bloomberg Intelligence, who believes the market opportunity for the Metaverse could reach
$800 billion by 2024, we can make a ballpark guess that around half of the revenues, or
around $400 billion dollars, will come from video games and the other half will come from
somewhere else, mainly commercial applications. If you're interested in learning more about
the companies pushing the limits on VR for a wide variety of commercial applications,
check out my recent episode on it. I think it does a pretty good job connecting some
interesting dots and all of the companies I mention in it are actually inside this ETF!
I'll leave a link to that in the top right-hand corner of your screen right now and in the
description below as well. Alright, so the Metaverse will be an 800 billion dollar market
in 2025, split between consumer entertainment and commercial applications. To capture the
growth of this entire market, the Meta ETF is designed to offer investors exposure to
the performance of the Ball Metaverse Index, which is the first index globally designed
to track the performance of the Metaverse. This is where things get really interesting.
What is the Ball Metaverse Index?
Let's start with Matthew Ball. Matthew Ball is a managing partner of EpyllionCo, which
is an early-stage venture fund and advisor. He's also a Venture Partner at Maker's Fund,
which is the world's largest gaming venture fund. There's no doubt that this dude understands
investing. However, it should also be clear that he really understands the Metaverse.
This past summer, he published a 9-part series covering a general Framework for the metaverse,
as well as the roles of Hardware, Networking, Compute Power, Virtual Platforms, Content,
Payments, and a couple of other important elements of the internet today and how they
translate into a connected Metaverse in the future. Just like I read all of ARK Invest's
research, one of my goals over the holidays is to catch up on Matthew's essays so that
I can share my findings with you. Even Mark Zuckerberg says these essays are a great analysis
of what the Metaverse is and what it could be. My point in talking about Matthew Ball
the person is to show you this isn't some random fund manager capitalizing on the latest
market trends and buzzwords. His deep experience in gaming, media, and investing might just
make him the exact right person at the exact right time to manage a Metaverse Index fund.
So let's talk about the cool way it's being managed. The Ball Metaverse Index is maintained
by yet another organization founded by Matthew Ball, called Ball Metaverse Research Partners.
The Ball Metaverse Index is a selection of companies in categories defined by the Metaverse
Market Map. Based on the research and analysis of an Expert Council with deep domain knowledge,
the Metaverse Market Map is a detailed projection of the different types of companies that will
technically enable the Metaverse, and benefit from its generated revenues and profits. These
categories will change as technology and consumer behavior evolves, determined through analyses
by the Expert Council. This Metaverse Market Map the categories I talked about earlier:
hardware, compute, networking, virtual platforms, data services, digital payments, and content
creation platforms. This is where that list comes from and why we see stocks like Nvidia
and Unity Software, but also stocks like Sea Limited and Coinbase, and Cloudflare. Here's
the part I'm really excited about.
This fund is rebalanced quarterly but in a pretty cool way. Instead of being conviction
weighted like ARKW, this Index utilizes a proprietary tiered weighting methodology.
Ball Metaverse Research Partners maintains a database of companies relevant to the Metaverse.
Upon each Selection Day, held quarterly in March, June, September, and December, every
company in the database is ranked by the Expert Council as either a ‘Pure-Play,’ ‘Core’
or ‘Non-Core’ in each category outlined in the Metaverse Market Map. Each company
is given a score in each category based on how much of their business affects that part
of the metaverse. “Pure-play” companies receive a 5, "core" companies receive a 2,
and non-core companies receive a 1. The council then makes sure that the total combined weight
for each category is 100%. No single category, like networking or digital payments, can be
more than 25% of the portfolio and companies can be classified in multiple categories but
single components are capped at 8% of the category. If that sounds confusing to you,
think about it like this.
The metaverse Jedi council gets together and scores every company based on how relatively
awesome they are at Metaverse-related hardware, computer, virtual platforms, and so on. Then
they decide how important those same categories are to the metaverse and how the holdings
inside this index fund should be weighted as a result. If one company is too awesome
in a given category, the extra awesomeness is divided among the rest of the companies
in that category according to how awesome they are at that same thing. If one category
is too important, its excess importance is given to the other categories the same way.
Since we know the rules and the current weights, I bet we could come close to figuring out
what scores this Jedi council is assigning each company in each category. You know, for
science! If we figure that out and can keep it up to date over time, it could reveal which
companies are dominating which categories according to these industry experts, which
could give us some information that other investors don't have. Comment below or tweet
me at Ticker Symbol YOU if you're interested in helping me do that. This could be a really
fun project and I'm willing to set it up if there's interest.
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Okay. So, I covered what's in the fund today, the key categories the stocks fall into, the
fund manager, and the weighting system. There's one more thing I want to do, which is to compare
it to ARKW, ARK Invest's fund themed around the next generation of internet applications.
Let's start with the fund holdings themselves. I was actually really surprised to find out
how different these funds are, given that they're both thematic funds focused on the
future of the internet and that the Meta fund's fact sheet directly references ARK Invest's
research. I'm happy to admit how wrong my assumptions were. ARKW is in blue and META
is in orange. ARKW holds a much wider variety of internet companies like Tesla, Teladoc,
Shopify, Roku, Spotify, Twilio, Draftkings, Palantir, Etsy, Docusign, and Nano Dimensions.
These companies are more about reducing the costs and pain points associated with professional
services by shifting to online infrastructures, enabling them to work on mobile devices, and
improving them with artificial intelligence. ARKW has a very broad theme.
Many of the companies only in META are very tightly related, including Nvidia, Microsoft,
Amazon, Taiwan Semiconductor, Qualcomm, Intel, AMD, Google, and Alibaba. Wow. Talk about
the tech giants of today. The two funds overlap on only 9 holdings: Roblox, Unity Software,
Coinbase, Metaverse Platforms, Sea Limited, Snapchat, Square, Cloudflare, and Disney,
which represent a pretty good cross-section of all the different categories that define
next-generation internet applications for ARK Invest and the different categories of
work the Metaverse fund cares about. These funds only overlap by about 23% by weight,
which isn't that much at all considering how similar they are in theme. Also, in case you
were curious, Meta only has 3 holdings in common with ARKK, ARK Invest's flagship innovation
fund: Unity Software, Coinbase, and Square. They hardly overlap at all. By contrast, ARKK
and ARKW overlap by a whopping 20 holdings and about 50% by weight. In my opinion, this
shows us that ARK Invest is trying to pick the next winners of the internet in their
ecosystem of actively managed funds while Meta is claiming that the current winners
will keep winning as today's internet transforms into tomorrow's Metaverse, which will encompass
many of the themes ARK Invest has individual funds for. These are two completely different
approaches to investing in the future. Comment below or tweet me at Ticker Symbol YOU with
your thoughts on the Metaverse ETF versus ARKK, ARK Invest's fund themed around the
next generation of internet applications. Are you surprised by how little they overlap
and how different their take is on the future of the internet? Which fund and weighting
system appeals to you more? Would you hold both in your portfolio or will you pick one
over the other? I'm excited to hear your thoughts.
Here's my assessment. When it comes to the fund managers, I'm excited to learn more about
Matthew Ball. I'm going to read his articles and try to decode his weighting system each
quarter. From what I've seen so far, he's put together a killer financial product. That
said, ARKW has been around for over 7 years now and has returned over 700% since inception.
People who think Cathie Wood is anything but an incredible portfolio manager are absolutely
delusional, no exceptions. ARKK, ARKG, ARKF, and ARKW were 4 of the best performing funds
last year, full stop. Speaking of which, ARKW has 5.5 billion dollars in assets under management
but don't let that fool you; the META ETF is already over 50% bigger than ARKX, ARK
Invest's newest fund themed around space exploration, even though it's only about half as old. So,
META is already proving to be a product investors want in their portfolios. That's awesome growth.
I think what it really comes down to is which investing approach you're looking for. Do
you want a fund manager that actively trades daily to take advantage of swings in price,
like the ones we're experiencing right now? Or do you want a fund with a structured weighting
system that gets updated quarterly, presumably based on the latest earnings reports? Do you
want a wider spread of companies that are enabled BY advances in the internet, like
Tesla and Teladoc, and Twitter? Or do you want a more focused group of companies that
are MAKING those advances in the internet, like Nvidia and Microsoft, and Unity? So,
here's my verdict.
For me, personally, I actually prefer META for a whole bunch of reasons. If you've been
following my portfolio project, you'll notice a LOT of overlap between this META ETF and
my own portfolio, so it really aligns with my vision of the future and my investment
thesis in it. Like I mentioned earlier, another thing I really like is that META has almost
no overlap with ARKK, while ARKK and ARKW overlap by a whopping 20 stocks or almost
50% by weight. META and ARKK could be 2 GREAT funds to hold a lot of and then pick individual
stocks to overweight in your own portfolio, a strategy I WILL talk about in future episodes.
For now, I hope this episode helped you learn about the Roundhill Ball Metaverse ETF, the
Ball Metaverse Index that it tracks, the system that Matthew Ball and his jedi council use
to shape that index each quarter, as well as Matthew Ball himself since funds are only
as good as their managers. If it did, consider investing in the like button and subscribing
to the channel with all notifications turned on. That's a great way to invest in the channel
that invests in you. Thanks for watching and until next time, this is Ticker Symbol YOU.
My name is Alex, reminding you, that the best investment you can make... is in you.