[This article appears in our July 2019 issue of ETF Report.]
In the last several years, several ETFs have launched that cover the robotics theme. They are all fairly different since this is not a well-defined space, yet they’ve mostly followed a very similar pattern in terms of performance.
Overview
The first fund to enter the robotics space was the ROBO Global Robotics and Automation Index ETF (ROBO) in October 2013. Today it’s a $1.2 billion fund that holds 91 different securities selected from emerging and developed markets.
However, ROBO is not the largest fund in the space—that label goes to the Global X Robotics & Artificial Intelligence ETF (BOTZ), which launched in September 2016 and currently has $1.5 billion in assets. For some time, ROBO and BOTZ were neck and neck in terms of size before BOTZ pulled ahead. It was likely helped by its expense ratio of 0.68% versus the 0.95% charged by ROBO. In a possible drawback, BOTZ has a much more concentrated portfolio of just 34 stocks and only covers developed markets.
But BOTZ also has a leveraged version of itself in the Direxion Daily Robotics, Artificial Intelligence & Automation Index Bull 3X Shares (UBOT)—both track the Indxx Global Robotics & Artificial Intelligence Thematic Index, but UBOT provides three times the returns of the index. UBOT launched in April 2018 and currently has $17 million in assets under management. It charges 1.49% in expense ratio.
The two smaller and more recent launches both rolled out in 2018. The iShares Robotics and Artificial Intelligence ETF (IRBO) debuted in June 2018 and has $32 million in assets. The First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT) rolled out in February 2018 and has $46.6 million in assets. IRBO has 90 different holdings, while ROBT has 91 securities in its portfolio. IRBO is the cheapest of the four nonleveraged ETFs, with an expense ratio of 0.47%, while ROBT charges 0.65%.
Strategy
ROBO tracks an in-house index from ROBO Global that targets stocks at the global level that are involved in the automation and robotics industries. The underlying index implements a proprietary weighting methodology. An index committee plays a significant role in determining which stocks qualify for inclusion.
Meanwhile, BOTZ focuses on companies from developed markets involved in the production and development of robotics and artificial intelligence (AI), and is based on an index that uses market capitalization to select and weight its components. Companies must derive a significant amount of their revenue from activities related to robotics and AI, or they must have a “stated business purpose” in that area to be eligible for inclusion.
IRBO’s underlying index uses market capitalization to select components, but equal weights them. The NYSE FactSet Global Robotics and Artificial Intelligence Index takes a global approach, and relies on filings and public disclosures to determine which companies are eligible for inclusion.
