Amundi and Invesco are among a cohort of asset managers that have benefitted from the recent buzz around AI and subsequent rally in tech stocks, with assets overseen by European funds focused on the metaverse reaching a record high.
According to exclusive data provided to Financial News from Morningstar, metaverse funds in Europe saw their collective assets rise to $1.1bn at the end of March — more than double the $403m they oversaw a year previously.
Amundi’s MSCI Digital Economy and Metaverse ESG Screened ETF is the largest such fund in Europe, with assets of $205m, according to Morningstar. The fund, which counts Nvidia and Alphabet among its largest holdings, has grown assets by 85% since the end of 2022.
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Meanwhile Invesco’s Metaverse and AI fund, which has its largest exposure to Microsoft and Meta Platforms, has seen assets swell by more than 260% over the past 12 months to $180.2m.
“AI has been the driver for fund flows,” said Tony Roberts, who co-manages the Invesco fund.
“AI is seen as accelerating the build out and adoption of the metaverse.”
Vincent Denoiseux, head of investment strategy at Amundi ETF, said an increase in metaverse fund assets “reflects a growing investor confidence in the digital economy and the metaverse as pivotal elements of the future economic landscape”.
Nvidia, Alphabet, Microsoft and Meta Platforms are among the so-called Magnificent Seven stocks, which drove the bulk of the 24% annual return posted by the S&P 500 last year.
The share price of Nvidia alone surged more than 230% last year and is up almost 80% since the start of 2024.
While a rally in tech stocks has helped buoy funds investing in companies viewed as key to the metaverse, investor appetite is also on the increase.
Metaverse funds in Europe collected $184m of new money between January and March, up from the $38.6m they gathered during the same period in 2022, according to Morningstar.
“No other theme has seen so many fund launches so quickly, as fund providers fell over themselves to be the first to market,” said Kenneth Lamont, a senior research analyst at Morningstar.
Lamont said despite “an uptick in interest” in the metaverse theme among investors, fund inflows were still relatively small.
“The hype peaked with Facebook rebranding as Meta in during the final quarter of 2021. But even as many of these newly minted funds launched, the news flow began to turn and investors shifted attention elsewhere. Most funds failed to attract significant inflows,” said Lamont.
Metaverse funds launched in 2022 by Franklin Templeton, Fidelity International and Legal and General Investment Management are among some of the smallest in Europe, with assets ranging between $3.8m and $7.4m.
Dina Ting, head of global index portfolio management at Franklin Templeton ETFs, said the metaverse’s position “at the at the intersection of blockchain technology and AI continues to spawn appealing long-term opportunities”.
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“It’s hard to ignore that last year was a comeback year for the technology sector, boosted by high demand for artificial intelligence and metaverse-related stocks,” added Ting.
“Investors have increasingly become convinced that these themes are enduring and very likely experiencing these emerging technologies themselves.”
Citigroup estimated in 2022 that the metaverse economy could be an $8tn to $13tn market by 2030.
McKinsey, meanwhile, predicted that Generation Z and Millennials, people whose ages roughly span 18 to 42, will spend an average of 4.7 hours per day in the metaverse by 2027.
“Like other tech themes, such as Internet of things and 3D printing, the idea of building a 3D interactive online world remains valid, even if the hype machine has retained its focus elsewhere.”
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