How can advisers benefit from the metaverse?

Size of the market 

However, most importantly, projections suggest that the metaverse is on track to become a growth area that investors cannot ignore.

A January 2022 report by Gartner suggests that by 2026, 25 per cent of people globally will spend at least one hour a day in the metaverse for work, shopping, education, social media and entertainment.

The world’s most recognised investment banks have already scoped out the total addressable market. Morgan Stanley sees metaverse-related businesses combined creating an $8.3tn opportunity in the US alone. Goldman Sachs sees an ultimate valuation of more than $12tn globally.

In February Nigel Bolton, head of Blackrock's fundamental European equity team, predicted “game-changer” products including AR glasses and 5G technology would fuel huge metaverse growth in 2022, not only for tech companies but also consumer, advertising and leisure stocks.

One major potential risk is that metaverse-related technology may never be implemented to a scale that provides identifiable economic benefit to the companies included in the theme. 

But the pace of change may be even more rapid than that. Given that digital asset markets have grown from a $10bn industry to one worth $2tn in less than six years, such predictions should not be quickly dismissed.

What is driving growth?

One of the cornerstones of the metaverse is VR and its associated technologies, AR and mixed reality (MR).

The terminology has not yet been rigorously defined, but the key concepts are that VR immerses people in 3D virtual environments, while AR, MR and extended reality (XR) takes computer-generated images and overlays them on our view of the world.

Apple is working on headsets that could replace smartphones as the interface for metaverse users in the future.

VR and AR are not new technologies but their usage is growing and their influence is starting to bleed into everyday life.

With the mapping ability of Google Earth extending from the deserts of the Kalahari to the mountains of Bali, VR users today can visit almost every location on the planet in 3D from the comfort of their sofa.

Both this and the freedom of movement constraints imposed by the Covid pandemic have opened the door to a very large potential market opportunity. 

Is the metaverse investable? 

The best way to conceptualise the metaverse is to consider an investment index dedicated to capturing the theme. One example is the Solactive ETC Group Global Metaverse Index. 

Composed of 52 equities, the index focuses on companies that potentially stand to benefit from the adoption and usage of technologies expected to grow and support the functioning of the metaverse.

To do so, the index is broken down into six core segments:

• AR/VR.
• Creator economy.
• Digital infrastructure.
• Digital marketplace.
• Gaming.
• Digital payments.

Let's look at each of them in turn.