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Anyone in the market for a video game ETF?

Nintendo’s Super Mario Bros.

Outside of gold, it has been a tough couple of years for investors, but there is one overlooked asset class that has performed remarkably well over this period: vintage video games.

The website Pricecharting.com has created a series of price indices for video games, from vintage systems such as the Sega Genesis to today's modern PlayStation 3 and Nintendo Wii. There is a large market in selling used video games and each index tracks the aftermarket price of every game for that system. Specifically, the index is calculated monthly by taking the "average price of every licensed, commercially released title" for a given video game console.

Since January, 2010, the Atari 2600 index is up 49.6 per cent and the Nintendo NES index is up a whopping 76.5 per cent.

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Not all of the indices have performed as well. The Super Nintendo index is up only 21.6 per cent over the period. This is no better than the Dow Jones Industrial Average and the Super Nintendo index has experienced a fair amount of volatility. Overall, however, a portfolio of classic video games would have, in theory, appreciated far faster than a portfolio of other asset classes.

Of course, these gains would be only theoretical, as a number of variables have been omitted from consideration. Vintage video games are not particularly liquid – it is difficult to immediately find a buyer or seller for a particular game. Transaction costs, from the price of an eBay listing to the costs of shipping, would likely eat up a significant portion of the profits. Storage costs could also become an issue if your portfolio became large enough, though this would be offset by the fact that you get to play the games.

However, there would seem to be an opportunity for an enterprising company to develop a fund, perhaps an exchange-traded fund, made up of vintage video games. It would solve the liquidity issue from the investor's point of view (the fund shares would be more liquid than the underlying assets). Bulk purchasing of assets would lower unit transaction costs, though there would be management and storage fees to consider.

I cannot see anyone starting a vintage video game ETF any time soon, which is unfortunate – I would invest in such a fund in a heartbeat.

Mike Moffatt is an Assistant Professor in the Business, Economics and Public Policy (BEPP) group at the Richard Ivey School of Business – Western University

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About the Author

Mike Moffatt is an Assistant Professor in the Business, Economics and Public Policy (BEPP) group at the Richard Ivey School of Business – Western University. Mike also does private sector consulting for the chemical industry. More

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