The impressive prospects of the robotics industry led major fund houses to launch products that provide significant exposure to this sector. Technological advancement and an urge to run businesses in a more efficient manner have played a major role in boosting the demand for robotics. This in turn had a positive impact on securities from the domain as investors are looking to take advantage of the sector’s solid potential.
For an instance, a Bank of America Merrill Lynch report shows that the robotics industry may expand at a robust rate from being worth $10.7 billion in 2014 to $83 billion by 2020. Meanwhile, reducing cost coupled with rapid advancement of technology is likely to reduce prices of robots significantly. This may further boost demand in the industry. According to CEO of Robo Global, Travis Briggs, prices, which dropped nearly 25% from 2010 through 2015, may fall a further 20% in the next five years.
This may be the primary reason why issuers are busy launching robotics focused ETFs. After Robo Global’s launch of
Robo Global Robotics&Automation ETF ( ROBO - ETF report) in 2013, Global X launched Robotics & Artificial Intelligence Thematic ETF ( BOTZ - ETF report) with an objective to gain from the emerging robotics industry.
These funds give exposure to stocks that operate within the robotic domain. Let’s take a look at these two products and find out the difference between each (see
all Technology ETFshere). Inside ROBO
The fund looks to track the Robo Global Robotics and Automation Index. Holding about 85 stocks in its portfolio, the fund maintains a
diversified portfolio with only 2.15% of its assets invested in the top company. Having debuted in 2013, the fund has amassed about $99.6 million in assets so far.
The fund is inclined toward heavy machinery (25%) and electronic components (23%). In terms of country exposure, the fund mostly invests in companies from the U.S. (43%) and Japan (23%). The fund is multi-cap in nature, with a tilt toward smaller capitalization. It has an expense ratio of 0.80% (read:
Bubbles Bursting For Technology ETFs?). Inside BOTZ
The 28-stock fund looks to follow companies that are into the increased application of robotics and artificial intelligence (AI). SMC Corp (8.29%), ABB Ltd-Reg (8.12%) and Keyence Corp (7.69%) are the top three holdings of the fund. Industrial Machinery takes up the first spot with about 30% exposure followed by Electronic Equipment & Instruments (11.6%) and Health Care Equipment (11.24%).
Geographically, Japan takes the top spot with about 46% weight while the U.S. (20.36%) and Switzerland (10.48%) also get a double-digit allocation. Though the fund invests in companies irrespective of their market capitalization, it has a slight tilt toward companies with larger capitalization. It charges 68 bps in fees (read:
3 Thematic ETFs from Global X Hit the Market). Bottom Line
As a seasoned player in the robotics domain, ROBO has the experience while BOTZ may attract investors’ attention as a comparatively cheaper option. BOTZ’s expense ratio of 0.68% is much lower than that of ROBO. Though both the ETFs have significant exposure to a number of nations, domestic exposure is higher in ROBO compared to BOTZ.
Separately, ROBO bears less company-concentration risks than BOTZ. Though there are a number of technology ETFs available in the market, the Robotics segment is relatively unexplored. Thus both ROBO and BOTZ are poised to offer investors scope for growth.
Want more information on the world of ETFs?
Make sure to check out the podcast below where we discuss the investing landscape with Kevin O’Leary and Connor O’Brien of O’Shares Investments:
(We are reissuing this article to correct a mistake. The original article, issued on Sep 21, 2016, should no longer be relied upon.)