Tracking virtual opportunities
Nasdaq’s ground-breaking index to capture opportunities in the metaverse was recognised as Most Innovative Index in Asia Asset Management’s Best of the Best Awards 2022.
The Nasdaq Yewno Metaverse Index (NYMETA) is the first of its kind in the region to track the shares of companies involved in metaverse-related activities. Joyce Ip, head of APAC Index Licensing, says: “Nasdaq is committed to designing powerful and relevant indexes that are leading edge and capture new opportunities. NYMETA is in sync with the new reality.”
The term metaverse refers to a virtual shared space that operates in parallel to the physical world, or combines the physical and virtual worlds. It can be accessed through technologies such as augmented reality and virtual reality.
Gaming platforms have been operating metaverses for some time, but the concept has recently expanded, with metaverses used for social networking, hosting live music concerts, and selling digital assets ranging from non-fungible tokens, to virtual shoes and clothes, to virtual real estate. Metaverse use cases are expected to continue to evolve going forward, to offer virtual offices, healthcare and even engineering.
The total addressable market of the metaverse could be worth US$800 billion by 2024, according to research by Bloomberg. NYMETA is designed to tap into this growth potential by tracking the performance of companies involved in the metaverse theme.
Companies are included in the index if they are expected to benefit from research and development in the three core metaverse sectors of equipment, platforms and content. Equipment covers companies active in areas such as producing virtual reality headsets, video games consoles, and eye-tracking technology, while platforms include technologies such as operating systems, social networking services and payment systems. Content covers everything from e-sports and e-commerce, to video games and advertising, to educational technology and the healthcare industry.
“All of these three areas stand to revolutionise the metaverse industry in many ways, while simultaneously reducing the cost and enhancing the quality, as well as the content of virtual, augmented and mixed reality,” Ip explains.
Stock selection
In collaboration with augmented intelligence provider Yewno, Nasdaq uses an artificial intelligence algorithm to analyse millions of data points, including more than 11 million global patent submissions and nearly 18 million news articles from the past six months, to identify US-listed companies with a high level of exposure to the metaverse, virtual reality, augmented reality and mixed reality.
Companies are considered for inclusion in the index on the basis of four scores.
These include an importance score, which measures how often each company is mentioned in connection with the target concept relative to all companies in the asset universe, as well as the percentage of each company’s mentions in relation to the target concept, compared with its mentions across other concepts.
Candidates are also given a similarity score, based on how close the company and its concepts are to other enterprises in the space, a centrality score, measured by the network created by mentions between concepts, and an aggregated score, combining and weighting scores in the previous three areas.
The top eight companies with the highest score in each of the these core areas of platforms, equipment and content are included in the index, as well as an additional 16 companies with the highest score across all three concepts. While 62% of securities in the index are technology companies, other sectors represented include consumer discretionary, industrials, telecommunications and healthcare.
“NYMETA tracks areas in the new economy, aka the new environment, to identify new investment opportunities,” Ip says.
Since the index was launched it has received an enthusiastic reception from investors, with Nasdaq collaborating closely with key asset mangers in the region. “The concept is particularly popular in Korea where we partner with Samsung Asset Management to offer local investors access to US investment opportunities,” Ip says.
NYMETA is not the only innovative index Nasdaq has launched recently. Other offerings include the Nasdaq Crypto Index, which tracks the performance of a basket of digital assets that are traded in US dollars, and the Nasdaq-100 ESG Index, which measures the performance of companies in the Nasdaq-100 that meet a specific ESG criteria.
APAC growth of AUM tracking Nasdaq indexes was up 70% in 2021. The company introduced innovative indexes to Asia Pacific and with the collaboration with the regional key asset managers, more than ten new products including those launched earlier this year were offered empowering investors to tap global thematic potential covering companies involved in digital payments, video games and e-sports, semiconductors, and clean edge green energy. Globally, $424 billion of AUM were linked to Nasdaq indexes end of 2021.