Robotics ETFs record strong inflows as sector outperforms

Apr 13th, 2017 | By | Category: Equities

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Flows into global and US equities as well as a surge of interest in automated technology have fuelled assets in robotic-focused exchange-traded funds.

Robotics ETFs record strong inflows as sector outperforms

The ROBO Global Robotics and Automation Index ETF (Nasdaq: ROBO) has returned an impressive 30.6% over the past year (data as of 12 April 2017).

According to a 7 April note from Bank of America Merrill Lynch, flows into robotic ETFs and mutual funds have grown significantly over the last year, swelling assets from around $5.1 billion to $8.9bn.

The latest Landscape report from BlackRock also found that global exchange-traded products gathered $64.8bn in March, setting a record pace this year and led by developed markets and US equities, the latter market leading the field in automated technology companies.

Consequently the four robotic ETFs available – two in the US and two listed in Europe – have grown from $415 million at the end of December last year to $1.1bn by the end of March, Bloomberg showed.

The four ETFs have beaten returns of the bellwether S&P 500 and the MSCI World over 12 months and since 1 January, but being technology-focused funds, the ETFs generally cater to more risk-seeking investors and may be best suited as a satellite holding in a diversified portfolio.

The first to launch in 2013 was the ROBO Global Robotics and Automation Index ETF (Nasdaq: ROBO) and has grown to $418m in assets. It costs 0.95% in fees and has performed 11.2% year to date and 30.6% over one year, compared to the SPDR S&P 500 ETF Trust (NYSE: SPY) which has returned 5.6% and 17.6% respectively. The US makes up 45.2% of the portfolio’s country exposure, followed by 26.8% in Japan, 7.4% in Taiwan and 5.1% in Germany.

The Global X Robotics & Artificial Intelligence Thematic ETF (Nasdaq: BOTZ) followed in September 2016 and currently has $53m in assets. It is significantly cheaper than ROBO at fees of 0.68%. Also in contrast to ROBO, the largest country exposure is to Japan (48.0%), followed by the US (21.9%), Switzerland (10.1%) and the UK (5.5%). It is up 15.2% since inception.

In Europe, the trend has also taken off. The ETF Securities Robo Global Robotics and Automation GO UCITS ETF (LON: ROBO) has grown to $427m since its launch in October 2014. It costs 0.80% in fees and has returned 10.9% year to date and 31.9% over one year in USD terms. The portfolio is concentrated with just 20 holdings. Almost two thirds of the exposure is in the US, with 11% in Israel, 10% in China and 9% in Japan.

The trailblazing fund in terms of low fees and quick asset-gathering was the most recent ETF to launch in 2016. The iShares Automation & Robotics UCITS ETF USD Acc (LON: RBTX) costs just 0.40% and already has $305m under management. Performance-wise, it has failed to shine as much as the others with just 8.2% returns year to date. The underlying index has the most global remit of the four funds. It tracks 91 stocks, with just over a third in the US and 26.7% in Japan and smaller percentages in Germany, the UK, and South Korea.

The future looks bright for these funds, which over time will be seen to be investing in less of a niche sector and more of a large established industry. Robot usage in everyday life is on the up, with the number of domestic household robots set to increase to 31m by 2019, found the 2016 IFR World Robotics Report. Industrial robots have increased from 60,000 to 254,000 since 2009, it said.

Global awareness, and not from investors, of the phenomenon is gathering steam. Google Trend data shows that online searches for “Automation and Robotics” have more than doubled over the last five years.

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