I'd rate these 2 ASX ETFs as strong options for diversification and growth

Going global with gaming and cybersecurity could be a smart move.

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Key points

  • Some industries around the world are achieving good underlying growth
  • There are a growing number of gamers and e-sports viewers in the world, which is good news for the VanEck Video Gaming and Esports ETF
  • Cyber attacks are becoming more common -- a sign there could be increasing demand for cybersecurity services in the coming years

There are some great ASX exchange-traded funds (ETFs) for investors to pick up on the Australian Stock Exchange. Certainly, I think there's space in a portfolio for growth-focused ETFs that give exposure to niche areas of the global economy.

With that in mind, I'm going to outline two ASX ETFs that are very interesting to me and could be good options to diversify a portfolio.

VanEck Video Gaming and Esports ETF (ASX: ESPO)

This ETF gives investors access to the global video gaming and e-sports market.

It's invested in some of the world's largest players in the sector, including Nvidia, Tencent, Advanced Micro Devices, Activision Blizzard, Nintendo, Electronic Arts, Bandai Namco, and Take-Two Interactive Software.

The e-sports sector is creating new potential revenue streams for the companies involved, including game publisher fees, media rights, merchandise, ticket sales, and advertising.

VanEck says e-sports revenue growth has increased on average by 28% per year since 2015, while overall video gaming revenue has increased by 12% per annum.

VanEck said:

E-sports reflect[s] the convergence of entertainment, video gaming, sports and media businesses. With an active, engaged and relatively young demographic, the stage is set for sustainable long-term growth.

The ETF had 25 holdings on 2 June 2023 so it doesn't exactly offer huge diversification, but it's much more diverse than owning just one or two names.

The index this ASX ETF tracks has returned an average 15.6% per annum over the past five years. However, the next five years could be quite volatile.

Betashares Global Cybersecurity ETF (ASX: HACK)

This fund invests in the current and future leaders of the global cybersecurity world.

While almost 80% of the portfolio is invested in US businesses, there are a few other countries that have a weighting of at least 3.3%, namely India, Israel, Canada, and France.

We've seen the dangers of cyber attacks with high-profile hacks hitting Medibank Private Limited (ASX: MPL), Optus, and Latitude Group Holdings Ltd (ASX: LFS).

According to research cited by BetaShares, the global cybersecurity market was US$137.6 billion in 2017. It had grown to US$223.7 million in 2022 and by 2030, it could reach US$478.7 million.

Businesses and governments are keen to avoid costly and dangerous cyber infiltration in this increasingly digital world, so it wouldn't surprise me to see cyber businesses continue to grow quickly. This would certainly help this ASX ETF.

Over the past five years, the HACKE ETF has returned an average of around 12.5%. Although past performance is not a reliable indicator of future performance, I think this ETF is demonstrating excellent growth credentials over the longer term.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Activision Blizzard, Advanced Micro Devices, BetaShares Global Cybersecurity ETF, Nvidia, Take-Two Interactive Software, and Tencent. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Electronic Arts and Nintendo. The Motley Fool Australia has positions in and has recommended BetaShares Global Cybersecurity ETF. The Motley Fool Australia has recommended VanEck Vectors Video Gaming And eSports ETF, Activision Blizzard, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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