For many investors, FY25 was filled with many highlights.
Those who continued to back gold rode the yellow metal to the psychological milestone of US$3,000. The gold price then rose, ultimately hitting an all-time high of US$3,500 in April.
Bitcoin investors who held their nerve amid heightened volatility were also strongly rewarded, with the popular cryptocurrency ending the financial year above US$100,000.
Then there were artificial intelligence (AI) stocks. Despite intense share price action in FY24, companies such as chipmaker Nvidia Inc (NASDAQ: NVDA) and Tesla Inc (ASX: TSLA) reached new heights in FY25.
If investors were asked to guess the best performing ASX exchange traded fund (ETF) of FY25, chances are they'd probably nominate an ASX ETF that centred around one of these themes.
However, they'd be mistaken.
Instead, the best performing ASX ETF tracked video game developers.
That ASX ETF was Betashares Video Games And Esports ETF (ASX: GAME), which rose an impressive 90% in FY25.
Image source: Getty Images
Under the radar
A recent article in the Australian Financial Review profiled Betashares Video Games And Esports ETF's record performance.
The article described GAME ETF as standing "above the rest this year, despite escaping the radar of most Australian investors."
Betashares' GAME ETF is a thematic ASX ETF that holds 40 of the world's largest video game stocks.
Since inception in February 2022, it has returned nearly 15% per year.
Betashares strategist Cameron Gleeson offered a theory about why the GAME ETF escaped many investors' radar and has performed so strongly.
As reported by the AFR, Gleeson said:
A lot of people in society aren't necessarily aware of how big gaming and e-sports are.
One of the great things about an ETF is that you can be diversified across gaming, but you don't actually know which company is going to have the next hit product.
Gleeson noted that of the 40 stocks tracked by GAME ETF, just five are based in the United States. Japan has the largest representation, with 13 companies. These include gaming giants such as Nintendo, Sony and Capcom, which are behind franchises like Resident Evil. Meanwhile, seven are based in China, which Gleeson described as a growing market despite regulatory intervention.
With fellow video-game thematic ASX ETF VanEck Video Gaming and Esports AUD ETF (ASX: ESPO) ranking the third best performing ASX in FY25, the sector certainly delivered for investors last financial year.
Foolish Takeaway
The best returns are sometimes found in markets that fly under the radar. While it's advantageous to remain up to speed on the biggest industry trends, searching for hidden opportunities can also be very rewarding. Investors should keep this in mind as they search for investment opportunities in the new financial year.
