If You Invested in Roundhill Video Games ETF (NERD)

The Roundhill Video Games ETF (NERD) is an exchange-traded fund sponsored and advised by Roundhill Investments, a registered investment adviser focused on thematic and sector-specific ETFs. According to Roundhill, the fund is designed to give investors exposure to the video games industry, with an emphasis on companies involved in gaming software development and publishing, as well as related online gaming services and esports.

Investment focus and strategy

Roundhill states that the Roundhill Video Games ETF focuses on the video games industry and generally holds companies that are publishers, developers and distributors of interactive gaming software for console, PC, mobile and cloud platforms. The fund also includes providers of related online gaming services and esports. Roundhill has announced that the fund will transition from an index-based strategy to an actively managed ETF, while continuing to focus on the video games industry.

Previously, the NERD ETF tracked the Nasdaq CTA Global Video Games Software Index (PLAYR2), which Roundhill describes as a modified market capitalization weighted index consisting of companies involved in gaming software development and publishing across mobile, console, PC, and emerging segments such as VR and AR. The index excludes video game companies domiciled in China and Russia, which Roundhill notes may reduce certain geopolitical risks to the portfolio.

Evolution of the NERD ETF

Roundhill reports that the ETF has undergone several changes over time. The fund’s name was changed to Roundhill Video Games ETF to reflect a revised focus on what Roundhill calls pure-play exposure to gaming software. Roundhill also highlights that the underlying index was changed to the Nasdaq CTA Global Video Games Software Index to align with this focus on video game software development and publishing.

In separate announcements, Roundhill has described changes to the ETF’s exchange listing. The NERD ETF’s listing was transferred from NYSE Arca to Nasdaq, and Roundhill later announced a further transfer from Nasdaq to Cboe BZX. In both cases, Roundhill stated that no shareholder action was expected as a result of the exchange transfers and that the transfers were not expected to affect the trading of fund shares.

Issuer and advisory background

The Roundhill Video Games ETF is part of the broader lineup of ETFs managed by Roundhill Financial Inc. (d/b/a Roundhill Investments). Roundhill describes itself as an ETF sponsor and investment adviser focused on innovative financial products, including thematic equity funds, options income strategies, trading vehicles, and sector-specific ETFs. The firm has stated that it offers products intended to provide exposure to investment themes that appeal to the next generation of investors.

Roundhill also notes that its ETFs, including the NERD ETF, are distributed by Foreside Fund Services, LLC, which is not affiliated with Roundhill Financial Inc., U.S. Bank, or their affiliates. Roundhill emphasizes that investors should review the fund’s prospectus or summary prospectus for detailed information on investment objectives, risks, charges, and expenses.

Industry concentration and risk profile

According to Roundhill’s disclosures, the Roundhill Video Games ETF is concentrated in the video games industry. Roundhill highlights several risk factors associated with video game companies and with the fund’s investment approach. Video game companies, as described by Roundhill, may face intense competition domestically and internationally, rapid product obsolescence, and a high dependence on the protection of patents and intellectual property rights. These factors are cited as potential sources of volatility and may affect the profitability and value of such companies.

Roundhill further notes that the fund may invest in small and mid-capitalization companies, which it characterizes as potentially more volatile and less liquid than larger companies, and as more sensitive to economic factors. The fund’s concentration in a specific industry or group of industries is also described as a source of risk, with Roundhill stating that the value of fund shares may rise and fall more than shares of more diversified funds.

The disclosures also indicate that the ETF may have exposure to foreign securities and Depositary Receipts. Roundhill points out that foreign investing can involve social and political instability, market illiquidity, exchange-rate fluctuations, high volatility, and limited regulation. Emerging markets are described as involving different and greater risks than more developed markets. Depositary Receipts, according to Roundhill, involve risks similar to those associated with investments in foreign securities and may not provide returns that correspond precisely with those of the underlying shares.

Role within a portfolio

Based on Roundhill’s descriptions, the Roundhill Video Games ETF is positioned as a thematic equity ETF focused on the video games industry, particularly gaming software. Rather than representing a broad market fund, it is presented as a way for investors to obtain targeted exposure to companies involved in video game development, publishing, distribution, and related online gaming and esports activities. Because the fund is concentrated in a specific industry and may invest in smaller and foreign companies, Roundhill emphasizes that investing in the ETF involves risk, including the possible loss of principal.

Key structural characteristics

• Fund type: Exchange-traded fund focused on the video games industry, as described by Roundhill.
• Investment adviser: Roundhill Financial Inc. (d/b/a Roundhill Investments), an SEC-registered investment adviser.
• Industry focus: Video game software publishers, developers, distributors, and related online gaming services and esports, according to Roundhill’s fund descriptions.
• Index history: Previously tracked the Nasdaq CTA Global Video Games Software Index (PLAYR2), which Roundhill describes as a modified market capitalization weighted index of gaming software companies.
• Strategy transition: Announced move from index-based management to an actively managed ETF while maintaining a focus on the video games industry.
• Exchange listings: Roundhill has announced transfers of the NERD ETF’s listing from NYSE Arca to Nasdaq and later from Nasdaq to Cboe BZX.

Disclosures and investor considerations

Roundhill repeatedly states that investing involves risk, including possible loss of principal. The firm advises potential investors to consider the investment objectives, risks, charges, and expenses of the Roundhill Video Games ETF carefully before investing, and to review the prospectus or summary prospectus for complete information. Roundhill also notes that shares of the ETF are bought and sold at market price, not net asset value, and that brokerage commissions can reduce returns.