Video Game Manufacturers Soar: Rebellion Talks with ESports Investor Roundhill Investments
The eSports investing ecosystem has been growing extremely fast, receiving funding up to $700 million from iconic high net-worth individuals such as Dallas Cowboys owner Jerry Jones. Accredited investors from every industry are starting to allocate capital in the private markets because the video game industry has been growing around ten percent annually for the past five years, making it the fastest-growing sector in entertainment.
Despite this impressive statistic, most people have not been able to invest in eSports because most investing has been done through venture funding and private equity.
To democratize eSports investing, Will Hershey (CEO) and Tim Maloney (CIO) founded Roundhill Investments, a registered investment advisor focused on developing innovative financial products for the millennials and Gen Z’s of today. Currently, the team runs and advises on the NERD ETF, which exposes investors to the eSports and digital entertainment industry.
Rebellion talks with Roundhill Investments’ Will Hershey, and the current esports market climate. Hershey grew up in New York City with both of his parents working on Wall Street, giving him early exposure to the financial markets. His love of gaming stemmed from a young age; two of his favorite hobbies were playing sports and video games.
Hershey currently enjoys playing Call of Duty: Warzone, Rocket League, and Apex Legends. For undergrad, Hershey went to Vanderbilt with his co-founder Maloney and studied economics and business. He then worked at Yorkville ETF advisors as an analyst in the energy sector for three years, followed by being the head trader for Yorkville Capital Management, LLC.
Working at Yorkville showed Hershey the big gap in the market for kid-centric ETF investing products where brand success is a top priority. This recognition led to Hershey and Maloney deciding that they were going to create an ecosystem for millennial and Gen-Z passive investing; thus, Roundhill Investments was born in September 2018. Hershey explained that Roundhill Investment’s philosophy was going to offer Peter Lynch style passive investments, with different products that they know and believe in.
Roundhill has just passed $250 million in assets under management. Principals, Hershey and Maloney runs one ETF traded on the New York Stock Exchange named the NERD ETF. Hershey explained that the NERD ETF is a rules-based index comprised of video game publishers, hardware companies, and large conglomerates involved in digital entertainment across 11 countries.
Notable U.S. companies on the index are Take-Two Interactive Software, Inc. (NASDAQ: TTWO), and Activision Blizzard Inc. (NASDAQ: ATVI); notable foreign companies included on the index are Tencent Holdings LTD (OTCMKTS: TCEHY), Nexon (OTCMKTS: NEXOF), and Ubisoft (OTCMKTS: UBSFY). The exact breakdown by market capitalization weight is 39.0% games, 11.8% broad-based, 29.0% media, and 20.2% hardware. As of December 14th, the NERD ETF has returned over 80% YTD, an astronomical sum.
The last part of our conversation with Hershey was about the current market climate.
Our biggest question was whether the current statistics on gaming usage, such as a 75% increase in gaming network usage year-over-year in the first week of December (according to Verizon), are temporary shocks or catalysts for long-term growth.
Hershey offered anecdotal evidence that several of his friends around 30 years old who have not played games in a long time bought gaming consoles for the quarantine. The potential for this to be happening at all levels, plus new free-to-play models, streaming and more technology democratizing the space, could lead to long-term growth from the current levels of spending and usage.
Hershey also presented stats about how Steam is breaking records every week, and Twitch usage was up 40% YoY in so far. He agreed that the quarantine has unintentionally helped the video game industry.
Written by Alex Katchadurian
Edited by Jason Kauppila, Jack Argiro, Michael Ding & Alexander Fleiss