[Editor’s Note: An earlier version omitted BOTZ as a competing fund to ROBO.]
One of the big changes that exchange-traded funds have brought to investors is the ability to invest in a particular technology, rather than trying to pick a singular tech company, which we know can be a loser’s game.
For instance, the ability to invest in the potential of a robotic revolution is offered in one of the sleeper ETF hits of the year, the ROBO Global Robotics and Automation Index ETF (ROBO), which has seen its assets under management (AUM) more than double since the beginning of the year. ROBO has received $263 million in new assets this year, bringing its total AUM to $402 million.
And the 3 ½-year-old fund is up 11.8% for the year, to boot, and up 34% over the past 12 months. There is another robotics ETF fund, the Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ), which was launched in September, has attracted $50 million in assets.
BOTZ has a cheaper expense ratio, 0.68%, compared with ROBO’s 0.95%, and is up 15.5% for the the year and has gained 17.65% since inception.
Similar in performance, but without the huge wave of new assets that ROBO has registered, the Global X Lithium & Battery Tech ETF (LIT) offers exposure to global lithium miners and battery producers, the “commodity” of everything related to the batteries that power our phones, computers and cars.
LIT, which is nearly seven years old, has seen $30 million in new assets this year, a 24% increase, taking its total to $162 million, while outperforming the crowd with a 15.3% gain year-to-date, and a 34% return in the past 12 months.
No Copycat Funds
The importance of robotics and battery technology in our 21st-century lives is undeniable, which certainly has been behind the attraction of these funds. There is real growth potential for these industries, and they are not difficult businesses to understand. The head-scratcher is that there are no competing funds with these two niche plays.
But the lack of copycats may also have something to do with how difficult it is to attract the assets ROBO has seen this banner year after launching 3 ½ years ago. And after seven years, LIT has just crossed over $160 million in assets.
Another fund in the same vein as ROBO and LIT is the cybersecurity fund PureFunds ISE Cyber Security ETF (HACK), with nearly $1 billion in AUM. Few can say with conviction they don’t worry about computer hacking on both an individual and corporate level. HACK is up 11.65% this year, and 24.55% over the last 12 months.
Quick Start Brings Competition
However, unlike ROBO and LIT, HACK came out of the launch gate on fire, attracting hundreds of millions of dollars in assets right off the bat. The fund debuted in November 2014 right before the Sony hack made headlines, which was followed by a series of other high-profile corporate hacking incidents. A little more than six months later, HACK cracked the $1 billion asset mark.
Success attracts competition, and by the summer of 2015, the First Trust Nasdaq Cybersecurity ETF (CIBR) was launched, which has $212 million in assets. HACK and CIBR have performed similarly this year, with HACK up 11.65% to CIBR’s 11.22%. For the past 12 months, CIBR has a performance edge of 25% to HACK’s 21%.
Charts courtesy of StockCharts.com
Assets Do Not Come Easy
There are a few other thematic tech ETFs that are making it up the asset hill to various degrees of success. The PureFunds ISE Mobile Payments ETF (IPAY) has offered investors a digital pay play, and after nearly two years, it has attracted $88 million in assets, while gaining an 8.5% return year-to-date and 16.30% in the last 12 months. There is no other competing pure-play digital pay fund.
Further down the asset chain, two other thematic tech ETFs are marking their one-year anniversaries by topping $10 million in assets: the PureFunds Drone Economy Strategy ETF (IFLY), with $11 million in assets; and the Amplify Online Retail (IBUY), with $10 million in AUM. These two may go hand in hand one day as a play. Amazon and other online retailers are very serious about using drones for delivery.
Both funds have seen about half the returns year-to-date and over the last 12 months as the other funds mentioned. Their time may certainly come, but as we have seen from LIT, patience is a virtue for ETF issuers, and it can be a flaw if assets never come around. There are other thematic tech ETFs that haven’t moved beyond their seeding funding of $2.5 million in assets.
With every new thin slice of the market that ETFs serve up, there is usually eye-rolling and the feeling that there are too many ETFs. But as seen above, these niche plays do sometimes attract meaningful assets and solid returns.
But make no mistake, the slog is real.
At the time of writing the author did not own any of the ETFs mentioned. Drew Voros can be reached at [email protected].