Erste Asset Management

How much fun comes with gambling? (Investment Board)

How much fun comes with gambling? (Investment Board)
How much fun comes with gambling? (Investment Board)
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Man forges his own destiny. This proverb hits a barrier when it comes to gambling: loss of control, addiction, and the destruction of one’s livelihood are often the consequence.

Not for nothing does our research find that gambling is by far one of the most dangerous business models when it comes to personal wealth in our investment universe. The high addiction potential results in considerable negative effects on health; according to our research partners’ opinion, they are exceeded only by tobacco. Thus, gambling is one of the sectors most removed from fulfilling the goals of sustainable development within the United Nations. That alone would already be reason enough to exclude this sector.

How much damage does gambling cause?

This notwithstanding, we have discussed with our research partner whether sustainable forms of gambling are possible. In doing so, we distinguish between the added offers of some hotels and cruise operators and of classic casino operators.

Hotels and cruise operators seem insignificant due to the subdued effects on the guests. The economic significance is equally minute: TUI reports that revenues from gambling accounts for only 0.001% of their cruise revenues. These companies will remain investable for us.

The situation is different for pure gambling providers. Here, we have seen an increased number of social problems, and the companies manage to absorb them only in the clear minority of cases. Most of the time they comply with statutory regulation at best. One of our research partners has eliminated the term “Sustainable gambling” from its criteria as a result of our talks, given that it is an oxymoron.

Prohibition failed, why should this be different?

The hope that legal gambling could at least oust illegal forms of gambling cannot be substantiated. In fact, the opposite is the case: according to studies, those US states that have legalised gambling have three times more illegal casinos than the rest of the United States. The role of legal gambling as a gateway drug into illegal forms of gambling has been confirmed.

How clean are casinos today?

Today’s Las Vegas is a product of the inventor spirit of the New York gangster Bugsy Siegel. He built the first casino for the Mafia at the infamous Las Vegas Strip as a way of laundering money. While the casinos on the Strip have meanwhile been transferred from the Mafia to public limited companies, the attraction for money from dubious sources has remained. For example, Las Vegas Sands, one of the biggest US operators, has recently had to settle out of court in connection with accusations of money laundering. Equally severe accusations have been raised against the Australian Tabcorp Holding.

Corruption seems to be linked to the topic as well: in Macao, the large-ticket revenues of the casinos have fallen by almost 50% since China started to take action against corruption in its administration. A positive development, because here the damage goes beyond the individual gambler and affects society.



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This document is an advertisement. Unless indicated otherwise, source: Erste Asset Management GmbH. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in connection with the InvFG 2011. The fund prospectus, Information for Investors pursuant to § 21 AIFMG, and the Key Information Document can be viewed in their latest versions at the web site within the section mandatory publications or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus, the languages in which the Key Information Document is available, and any additional locations where the documents can be obtained can be viewed on the web site A summary of investor rights is available in German and English on the website as well as at the domicile of the management company.

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Detailed information on the risks potentially associated with the investment can be found in the fund prospectus or Information for investors pursuant to § 21 AIFMG of the respective fund. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation, and risk appetite. Past performance is not a reliable indicator of the future performance of a fund.