It then applies additional filters for liquidity, market capitalization and ESG, whittling down a database of more than 1,000 companies to fewer than 100.
Over half of ROBO’s investments are mid-caps, and more than 20 percent of the portfolio is in small-cap stocks. The U.S. accounts for 41 percent of ROBO’s holdings, with nearly 27 percent coming from Japan and another 12 percent coming from Europe.
Top holdings include iRobot, the maker of the Roomba vacuum cleaner, and Mazo Robotics, a designer of a robotic guidance system for spinal surgery.
ROBO carries a 0.95 percent expense ratio.
While a couple of larger ETF sponsors have entered the robotics fray, ROBO Global believes its focus on one suite of products derived from its index makes it distinctive.
“We’re a boutique firm with a specialized niche, and 100 percent of our resources are spent researching and thinking about this,” says Buck. “We’re aware that people want to bring similar products to market, but we want, if possible, to bring out the value in these trends by being a focused firm.”
The Global X Robotics and Artificial Intelligence ETF (BOTZ) was launched in 2016 and already has nearly $2.4 billion in assets. The fund tracks the Indxx Global Robotics and Artificial Intelligence Thematic Index.
Compared to ROBO, BOTZ is less technology oriented, focusing instead more on industrials. The Global X offering is also less domestically focused than Robo Global’s ETF.
BOTZ outpaced ROBO in 2017 with total returns of 58 percent. It sports an expense ratio of 0.68 percent.
The just-launched First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT) tracks the Nasdaq CTA Artificial Intelligence and Robotics Index, which identifies robotics- and AI-related companies as enablers, enhancers and engagers, depending on their business relationship to the technology. Enablers develop AI and robotics components, while enhancers offer value-added services within an AI or robotics environment.
The ROBT fund’s index attempts to prioritize investing in “engagers,” the companies building and delivering AI and robotics. To be included in the index, companies must have a minimum market value of $250 million and a three-month average daily trading volume of at least $3 million. ROBT has an expense ratio of 0.65 percent, making it the most inexpensive robotics-focused ETF.
Buck says a fund such as ROBO can be deployed as part of the equity portion of any portfolio.
“It adds some unique diversification to portfolios,” he offers. “The quick thinking is that robots are niches and that people shouldn’t buy niches, but we think ROBO does some cool things. If you ripped off the name and we called it some sort of factor ETF at the portfolio level, people might look at it as a useful portfolio tool.”