5 Traits Of Successful Thematic ETFs

August 27, 2018

Whenever there are two big ETFs tracking the same theme, the one that brings in the most money is inevitably the one that costs the least.

A good example of this was the race between two automation/robotics ETFs, the $2.2 billion Global X Robotics & Artificial Intelligence ETF (BOTZ) and the $2.1 billion ROBO Global Robotics And Automation Index ETF (ROBO). Though ROBO was launched in 2013, it wasn’t until BOTZ launched in late 2016 that flows into ROBO also began to accelerate, and the two engaged in an arms race for assets throughout most of 2017 and into 2018.

Yet BOTZ has a price tag that is 0.27 basis points lower than ROBO’s 0.95%, and unsurprisingly, BOTZ appears to have surpassed ROBO in flows. Over the past six months, for example, BOTZ has brought in $239 million, whereas ROBO has seen outflows of $72 million.

People who invest in themes really, really believe in those themes, to the point that bad returns don’t seem to have much effect on the flows into a thematic ETF.

So it goes for infrastructure, where IGF is down 1.9% year-to-date, but investors have poured $496 million in new net money into the fund so far this year. And in artificial intelligence, where BOTZ is down 4.5% year-to-date, investors have put $952 million into the fund in the same time period.

Yet while bad performance doesn’t scare away investors, good performance can lure in new ones. IBUY is up 30% year-to-date, and has seen inflows of $266 million over the same period, equivalent to 52% of the fund’s assets under management (as of this writing).

Meanwhile, the $163 million AI Powered Equity ETF (AIEQ), one of the first ETFs to have a portfolio constructed entirely by artificial intelligence, is up 13% year-to-date, beating the SPDR S&P 500 ETF Trust (SPY) by more than 7%. It has also pulled in $68 million in new money, equivalent to 42% of its level of assets at time of writing.


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