Gaining Portfolio Exposure to the Metaverse through Republic

Republic recently expanded its nonaccredited offerings to the Metaverse. Here we examine how to gain exposure using their new Metaverse real estate fund.

Gaining Portfolio Exposure to the Metaverse through Republic
Photo by fabio / Unsplash

This week Republic expanded its offerings into the Metaverse for nonaccredited investors. Reservations opened for its Metaverse Real Estate Fund administered by Republic Realm. Realm, the Metaverse arm of Republic, will run the fund and develop diverse NFT investments across multiple Metaverse platforms such as Decentraland and Sandbox. With Facebook's rebranding to "Meta" and the Metaverse explosion into public view, what is the Metaverse, and how can Republic's fund help you gain exposure in your investment portfolio?

Due to its nascency, we at Polybius Square struggle to clearly define the Metaverse. Matthew Ball, a venture capitalist, and DeFi writer, describes it in the following way:

"The Metaverse is a massively scaled and interoperable network of real-time rendered 3D virtual worlds which can be experienced synchronously and persistently by an effectively unlimited number of users with an individual sense of presence, and with continuity of data, such as identity, history, entitlements, objects, communications, and payments."

The scope and scale of that definition defy easy understanding and visualization. To better examine the portfolio's potential, we broke down the different Metaverse investments in the fund to see what each offers its users.

First, what is its prior performance?

Since March 2021, the current fund valuation has grown 145.26%. The bull runs in crypto this year, as adoption grew, defied expectations. Could the next fund grow that much in such a short amount of time? Hard to say. We would be impressed if it could beat those numbers again.

Next, what does Republic do with its virtual real estate?

According to its pitch, it adopts three strategies:

1. The long-term hold. The fund does not buy and quickly flip assets. It seeks "relative value" by pursuing public and private sales opportunities and other avenues such as distributed autonomous organizations (DAOs).

2. In-house development. According to its pitch. Republic develops the assets it purchases with its own design team. That includes games in the Metaverse. Looking at what the team has built so far, we see the potential for continued value add. Development of digital assets takes time. Suppose a design team can grow a large codebase and technical synergies. In that case, they gain a competitive advantage in the marketplace. We believe that if it can maintain its team, Republic's metaverse arm could become a massive player in the space and provide significant returns to shareholders.

3. Strategic partnerships. Republic advertises that it works with gaming guilds, brands, and other entities to grow recurring revenue. Recurring revenue is critical to real-world real estate. If the same principles apply in the Metaverse, it could consistently provide value to investors. One strategic partnership of note is Mike Novogratz. His firm, Galaxy Digital, is a lead investor in the fund. You can read about it from Reuters here. Novogratz's involvement in the fund is massively bullish for us. Big names can make big deals. Networks matter. Growth is inevitable if big names invest in the best developers to create great experiences for users.

Finally, what Metaverses does the fund invest in?

According to investment documents, the top three are Decentraland, the Sandbox, and Axie Infinity. The fund also possesses smaller investments in other projects. Because individuals own and profit from holdings and intellectual property that they build on Metaverse platforms, we believe that creators will flourish and profit, driving a positive feedback loop of better content. We are bearish on Steam and other gaming platforms that cannot adapt and believe that the Roblox model scaled in a decentralized manner will win over several decades.

The current reservations for the fund totaled over $41 million at writing. If you are bullish on this thesis, you can reserve your spot in the Republic fund here. For more analysis on Republic look here.

You can also gain exposure through ETFs such as $META. Here's a great video on the ETF from Ticker Symbol You on Youtube.

If you are bearish, then you can short Metaverse stocks.

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I am not a financial advisor. This article is for educational purposes only. You should do your own independent research before making any investment decisions.

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