Gaming ETFs on brink of boom as new Playstation, Xbox near debut

With pre-orders for Sony’s Playstation 5 and Microsoft’s Xbox X Series sold out almost everywhere before their November release, video-game ETFs are ripe for a boom. 

The supply-chain constraints coupled with high demand shows “this console cycle is going to benefit mostly all of the videogame companies,” according to Pedro Palandrani, an analyst at Global X Management Company. HERO, an exchange-traded fund managed by Global X, has surged almost 70 per cent this year. But the recent volatility and sideways-trading over the past month or so suggest there needs to be a new catalyst to extend the rally.

Palandrani sees upside stemming from sales data. “We’re going to see renewed interested in the industry,” he says, “as we get more sales reports of these video game” consoles and progress of other complementary goods.

The last major video-game console upgrade cycle occurred in 2013, again headlined by previous iterations of PlayStation and Xbox devices. Back then, major game publishers — Electronic Arts, Activision Blizzard, Take-Two Interactive Software and Ubisoft Entertainment — generously outperformed the broader market for at least a 24-month period.

The drop in the Solactive Video Games & Esports Index since the beginning of September indicates some fear among traders about how a move toward a reopened economy impacts the industry’s prospects. But Palandrani expects that even as life gets a little closer to normal, the increase in video-game playing won’t completely reverse course because people will be more used to entertaining themselves at home. Plus, he points out, the pandemic is far from over.