While some investors salivate over the prospects for a bitcoin exchange-traded product, one of the hottest thematic investment ideas, robotics and automation, has been available as an exchange-traded fund for nearly five years.
The oldest robotics ETF, the ROBO Global Robotics & Automation Index ETF (ROBO), launched in 2013 and returned more than 44 percent in 2017 as interest in robotics funds surged. In 2017 alone, ROBO attracted $1.5 billion in new assets and now has nearly $2.4 billion in AUM. As of March 7, ROBO has three-year average annualized returns of 18.7 percent.
Launching ROBO was an attempt to grab the information technology revolution by the horns, says Chris Buck, head of capital markets and sales for ROBO Global.
“We recognized early on that robotics is an enabling technology that was going to revolutionize many other segments of the economy,” he says. “This could be a paradigm shift equal to the printing press.”
Buck says that robotics, automation and artificial intelligence are exponential technologies. The industrial robotics movement was born in the 1960’s when auto manufacturers introduced robots on their assembly lines. By 2017, robotics was a $64 billion industry, according to Buck, and by 2025 it could grow to $1.2 trillion.
Robotics and automation will impact all industries, expanding from its origins on industrial assembly lines into health care, banking, transportation, logistics, security and energy. Robots improve companies’ capital efficiency and productivity by augmenting human abilities.
The automation trend is already in full swing, with robots being deployed as surgical assistants and guides, drivers and drones, and warehouse pickers, among other uses. Neural networks are transforming computers into sophisticated decision makers that can rival humans. And as robots become more capable of automating complex tasks, they will wield greater influence over the economy, Buck says.
Bucket List
In 2013, it wasn’t clear from an investment perspective which companies would come to market with the best solutions in automation and robotics, Buck says.
“The challenge was that nobody had thought about what fits into the bucket of what we pre-defined as ‘innovative thinkers’ in robotics and automation, so we had to enlist specialists in the field,” he says.
As its name implies, the ROBO fund tracks the ROBO Global Robotics and Automation Index containing 92 equally weighted stocks. The index classifies a proprietary global database of companies into 12 robotics and automation subsectors. The methodology screens companies for revenue derived from automation and robotics, and selects firms that are positioned as market and growth leaders in robotics.