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


Funds investing in the metaverse are now managing more than $2bn globally, as a flurry of launches from some of Europe’s biggest asset managers look to take advantage of 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 that oversaw assets of just over $2bn worldwide as of the end of July, according to Morningstar, up from $179m across just six funds as of the end of August 2021.

Total assets peaked at $2.6bn at the end of March, but have since dipped.

Investors have ploughed almost $500m into metaverse funds so far this year, with the world’s biggest 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 some $8tn.

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

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

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

“We believe that investment in the metaverse and its rising sophistication bode well for the next iteration of the internet, which could profoundly impact societies and global economic growth,” said Ting.

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

LGIM said the fund offers investors exposure to “innovative companies developing and driving revenues from the core technologies needed to deliver the metaverse, the next frontier of the internet”.

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 are not the only asset managers to have a bullish outlook on the metaverse.

BlackRock — the world’s biggest fund manager — is also sizing up opportunities.

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

Despite growing excitement among fund managers, however, Morningstar’s Lamont warned investors “should look beyond a strong narrative” when selecting thematic funds, as there is no market standard for how themes should be defined or tracked. Each thematic fund takes 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 allows investors the freedom to choose the most appropriate solution for themselves but also creates an additional due diligence and ongoing monitoring burden.”

Chris Chancellor, a senior director for global insights at data provider Broadridge, said there was increased interest among fund selectors about gaining exposure to the metaverse.

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

“On the whole, selectors like innovation, and fund flows show that new funds are extremely important for the industry – especially in difficult years.”

Chancellor was doubtful about whether metaverse funds would generate “huge 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 of discussion with clients are always welcome — the key for managers will be showing this is a theme that can persist and has enough of an investment remit to be diversified,” he said.

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