The world today might not be the one people imagined when they thought of the future decades ago. We aren't flying in cars like in “The Jetsons,” and most of us don't have a talking robotic housekeeper.
Still, the world today is pretty darn futuristic. Google, Uber and a host of other companies are competing to see who can unveil the first driverless cars; Amazon is toying with the idea of delivering packages with drones; and governments around the world are scrambling to protect and arm themselves in a new age of cyberwarfare.
Automation, drones and cybersecurity are just some of the areas of rapid technological advancement that will have a profound impact on society in the years to come. Successful companies in these industries have the potential to bank big profits, and investors in those companies will have a chance to share in the upside.
That's the thesis behind several niche exchange-traded funds that key in on futuristic themes, such as those mentioned above, along with others. These ETFs offer investors targeted exposure to companies working in cutting-edge industries, something that broader, more diversified ETFs don't provide.
Proponents of passive index investing will likely scoff at these offerings, while investors with a more active bent may find them intriguing. In any case, here are a few of the more interesting futuristic ETFs on the market.
The PureFunds Drone Economy Strategy ETF (IFLY) is one of a handful of futuristic ETFs launched this year.
IFLY provides investors exposure to the drone industry. Specifically, IFLY holds companies involved in the commercial drone market, which caters to clients involved in agriculture, construction, real estate, energy, media, government and others. PureFunds expects that the benefits of drone technology will "touch a majority of industries in the coming years."
Top holdings of IFLY include AeroVironment, Parrot and GoPro. The ETF has a 0.75% expense ratio and has returned about 1% since its inception in March.
Another flashy futuristic fund that launched this year is the 3D Printing ETF (PRNT), issued by ARK Invest, an ETF company founded in 2014. PRNT is one of a number of thematic funds focused on "disruptive innovation" launched by ARK in the past few years.
PRNT itself is brand new, having been on the market for just three months. The ETF holds shares of companies involved in 3D printing hardware, computer-aided design, 3D printing simulation software, 3D printing centers and 3D printing materials.
ARK, like many others, expects 3D printing to "revolutionize manufacturing." If so, PRNT, whose top holdings currently include HP, 3D Systems and ExOne, may be poised to benefit.
The ETF has a 0.66% expense ratio and is up 3.9% since inception.
The Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ) is a new entrant into the "robotics" space. The two-month-old fund competes with the much larger ROBO Global Robotics and Automation Index ETF (ROBO), and attempts to differentiate itself with an artificial intelligence angle.
Global X anticipates that robotics and artificial intelligence technologies can help offset the problem of a shrinking labor force in many developed countries. Industries that BOTZ attempts to provide exposure to include agriculture robots, home robots, artificial intelligence analytics, autonomous cars and bionics, among others.
Currently, the three largest holdings of the fund are SMC, Fanuc and Mitsubishi Electric. BOTZ has a 0.68% expense ratio and is up 2.2% since inception.
Internet Of Things
One of the biggest buzzwords in tech right now is "internet of things." Many see this idea of connecting everyday objects to the internet becoming a reality in the not-too-distant future.
The Global X Internet of Things Thematic ETF (SNSR), launched in September, attempts to capitalize on this potential revolution in technology. SNSR invests in companies that are involved in the "development and manufacturing of semiconductors and sensors, integrated products and solutions, and applications serving smart grids, smart homes, connected cars, and the industrial internet."
STMicroelectronics, Skyworks Solutions and Garmin are three of SNSR's largest holdings. The fund has a 0.68% ratio and is down 0.8% since inception.
Growing List Of Thematic ETFs
The aforementioned ETFs are only a sampling of the growing list of new tech ETFs on the market. Others include the PureFunds ISE Cyber Security ETF (HACK); the First Trust ISE Cloud Computing Index Fund (SKYY); the ARK Genomic Revolution Multi-Sector ETF (ARKG); and the iShares Exponential Technologies ETF (XT).
As always, investors should check under the hood to see what kind of exposure each fund truly provides; a catchy theme shouldn't be the sole reason to buy an ETF. Fund reports for every ETF can be found at www.etf.com/ETF ticker (such as www.etf.com/SPY).
Contact Sumit Roy at [email protected].