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With the exponential growth of ETFs, "thematic investing” is rising and the “smart beta” theme is selling like hot cakes. Keeping up with this trend, the leading provider of thematic ETFs, First Trust, is looking to cash in on the two hottest untapped technologies - artificial intelligence (AI) and robotics – with the launch of the Nasdaq Artificial Intelligence and Robotics ETF ROBT.
ROBT Portfolio
The new fund looks to track the Nasdaq CTA Artificial Intelligence and Robotics Index, which measures the performance of companies engaged in AI, robotics and automation that are classified as either enablers, engagers or enhancers (read: How to Invest in the Hottest Technologies With ETFs).
Engagers are the companies that help make robotics and AI products; enablers are companies that make components for robotics or AI like semiconductors; and enhancers are companies that provide their own value-added services within the AI and robotics ecosystem. The index then selects the top 30 companies within each category based on their rank. Engagers get 60% weight, enablers 25% and enhancers 15%.
Currently, the index features 88 stocks with more than half of the portfolio dominated by information technology, closely followed by industrials (32.6%).
How does it fit in today’s portfolio?
The ETF could be an intriguing choice for investors seeking to gain exposure to the rapidly evolving field of AI and robotics technology.
While these are still in early stages of development, the technology is expected to see a huge surge in demand in the years ahead, given increased usage in diverse sectors including healthcare, industrials and technology. The technologies help in analyzing unstructured data like tweets, social media posts, photos and videos. Investors are thus betting big on these emerging technologies.
According to reports, the AI robots market is expected to rise from $3.49 billion in 2018 to $12.36 billion by 2023, at a CAGR of 28.78% between 2018 and 2023 (read: 10 Hottest ETF Themes for 2018).
ETF Competition
There is an appetite for this fund despite a couple of choices already available in the space. The ROBO Global Robotics & Automation Index ETF (ROBO - Free Report) is the first dedicated robotics ETF launched in October 2013. It has AUM of $2.3 billion and expense ratio of 0.95%. Another ETF - Global X Robotics & Artificial Intelligence ETF (BOTZ - Free Report) – also offers exposure to companies that potentially stand to benefit from increased adoption and utilization of robotics and AI. The ETF has amassed $2.3 billion in its asset base since its debut in September 2016. It has expense ratio 0.68%.
The first AI ETF - AI Powered Equity ETF (AIEQ - Free Report) – could also pose a threat to the new ETF. It is an actively managed fund and has been able to amass $141.5 million since its debut in October last year. However, it has a high expense ratio of 0.75% (read: First Artificial Intelligence ETF Soars in Popularity).
Bottom Line
Given that ROBT invests in the hottest emerging technology trends, it will not be much difficult for the product to see big inflows and solid investor interest even if it comes with a high expense ratio.
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First Trust Launches Another Robotics ETF
With the exponential growth of ETFs, "thematic investing” is rising and the “smart beta” theme is selling like hot cakes. Keeping up with this trend, the leading provider of thematic ETFs, First Trust, is looking to cash in on the two hottest untapped technologies - artificial intelligence (AI) and robotics – with the launch of the Nasdaq Artificial Intelligence and Robotics ETF ROBT.
ROBT Portfolio
The new fund looks to track the Nasdaq CTA Artificial Intelligence and Robotics Index, which measures the performance of companies engaged in AI, robotics and automation that are classified as either enablers, engagers or enhancers (read: How to Invest in the Hottest Technologies With ETFs).
Engagers are the companies that help make robotics and AI products; enablers are companies that make components for robotics or AI like semiconductors; and enhancers are companies that provide their own value-added services within the AI and robotics ecosystem. The index then selects the top 30 companies within each category based on their rank. Engagers get 60% weight, enablers 25% and enhancers 15%.
Currently, the index features 88 stocks with more than half of the portfolio dominated by information technology, closely followed by industrials (32.6%).
How does it fit in today’s portfolio?
The ETF could be an intriguing choice for investors seeking to gain exposure to the rapidly evolving field of AI and robotics technology.
While these are still in early stages of development, the technology is expected to see a huge surge in demand in the years ahead, given increased usage in diverse sectors including healthcare, industrials and technology. The technologies help in analyzing unstructured data like tweets, social media posts, photos and videos. Investors are thus betting big on these emerging technologies.
According to reports, the AI robots market is expected to rise from $3.49 billion in 2018 to $12.36 billion by 2023, at a CAGR of 28.78% between 2018 and 2023 (read: 10 Hottest ETF Themes for 2018).
ETF Competition
There is an appetite for this fund despite a couple of choices already available in the space. The ROBO Global Robotics & Automation Index ETF (ROBO - Free Report) is the first dedicated robotics ETF launched in October 2013. It has AUM of $2.3 billion and expense ratio of 0.95%. Another ETF - Global X Robotics & Artificial Intelligence ETF (BOTZ - Free Report) – also offers exposure to companies that potentially stand to benefit from increased adoption and utilization of robotics and AI. The ETF has amassed $2.3 billion in its asset base since its debut in September 2016. It has expense ratio 0.68%.
The first AI ETF - AI Powered Equity ETF (AIEQ - Free Report) – could also pose a threat to the new ETF. It is an actively managed fund and has been able to amass $141.5 million since its debut in October last year. However, it has a high expense ratio of 0.75% (read: First Artificial Intelligence ETF Soars in Popularity).
Bottom Line
Given that ROBT invests in the hottest emerging technology trends, it will not be much difficult for the product to see big inflows and solid investor interest even if it comes with a high expense ratio.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>