View from the CIO

In today's world, elements of the Metaverse do exist particularly in the eGaming sector. Epic Games' Minecraft or Fortnite offer users much more than just the chance to play video games – they have developed social communities around virtual worlds where users can log-in to interact with one another and even attend virtual concerts – think US artist Travis Scott playing virtually to 12 million people in real time during lockdown April 2020. More recently platforms such as The Sandbox or Decentraland have seen virtual plots of land sell for as high as $4.3m USD (as at December 2021). But these platforms are not interoperable and the technology behind them from headsets to the look and feel of augmented reality, remain clunky.

With Big Tech and Communication giants committing large sums of capital to developing Metaverse, we agree with our colleagues at equity research house Redburn that:

"..owing to its ‘open’ standing definition it seems inevitable that those companies who capitalise on the opportunity soonest will take the largest slice of the profit"6

6 Come Together: Welcome To the Metaverse, Redburn Review, December 2021. Nina Marques.

We do however think that the technology which sits behind the development of the Metaverse is arguably more important for investors to understand than the forum itself - whatever that may look like in the future. Seamless website interoperability, single user access points and real time continuous communications will bring about a radical overhaul of the current internet, bringing new opportunities far beyond the world of video gaming. You only need to look at Microsoft's Mesh to see how Metaverse-led technology will have a wider impact on the way we work in a hybrid / virtual world. But the road to monetising good ideas is rarely straight forward and companies will need to develop, invest and test technology over many years – we do not expect this journey to be linear. As mentioned on a recent call with our Global Advisory business:

"The US is structurally positioned to lead in the development of the Metaverse and Europe will follow. Today the metaverse is where the current internet was in the 1990s. We know that it will emerge and that one day we will be having meetings in the metaverse. It will be a success but for now we must wait."*

Returning to our investment teams, it is important to understand the technological advances which are coming with the Metaverse, just as with those seen in the arrival of Blockchain technology. Only once these are understood can their impact on our clients' investments be explained in turn.

*Virginie Lazes, Co-Head of European Technology, Global Advisory, Rothschild & Co