Today's new ETF listings from around the world.
iShares lists same but different robotics ETF
iShares is listing a robotics ETF in the US, following in the footsteps of iShares UK. The iShares Robotics and Artificial Intelligence ETF (IRBO) will bear a very similar name to its UK counterpart but have a very different index and investment style (discussed below).
IRBO will track the NYSE FactSet Global Robotics and Artificial Intelligence Index, which allows it to use FactSet's industry classification system, known as Revere ("RBICS"). It starts with index agent NYSE picking its 22 favourite sub-sectors from RBICS, then looking at companies within them, trawling through their regulatory filings, earning transcripts, and other public documents to see which are involved in robotics and AI.
To qualify, companies need to either:
derive 50% of their revenues, or;
have at least a 20% market share, or generate $1 billion-plus in revenue from one of the 22 RBICS sub-industries, the prospectus says.
The index will be equally weighted, like the UK robotics ETF (RBOT:LN). In a similar manner, we suspect the TER will be 0.40%, again the same as the UK product.
Analysis - Robotics ETFs have been a winner, but...
As the ETF market crowds, making blockbuster products is harder than ever. But robotics ETFs have pulled it off.
They have been a hit for investors, with index-beating performances. And a hit for ETF providers, attracting billions in inflows. Their success has helped put "thematic" ETFs on the map and encouraged issuers to put out ageing population ETFs, healthcare breakthrough ETFs, fintech ETFs and more, knowing that the thematic approach can and has worked.
IRBO is the fourth robotics ETF to be listed in the US, after ROBO Global's ROBO, Global X's BOTZ and First Trust's ROBT. One, therefore, has to wonder how BlackRock plans to make its product different. Our feeling is that the key differentiator will be cost. The other three robotics ETFs charge between 0.65 and 0.97%. BlackRock's UK-based robotics ETF charges 0.40% (and, again, we suspect the US edition will charge the same.)
... the US product looks quite like a regular old tech ETF
While the UK fund will likely set the tone on price, when cracking open the two funds, we found BlackRock UK and BlackRock US have quite different ideas about what a robotics ETF should look like.
The US edition contains the FANGS (Facebook, Amazon, Netflix, Google, Salesforce.com), the Chinese BAT (Baidu, Alibaba, Tencent), as well as other run-of-the-mill tech companies like IBM, Nokia, Twitter, Apple. Many of its constituents are the familiar large-cap household-name tech companies, which at first blush are not your obvious picks for robotics and AI innovators.
For us, salesforce.com, Facebook and Google are stand out question marks. They are users of AI - yes. But they're not producers of it. And when you look at the revenue these companies draw from actual robotics and AI, it's in the low single digits. BlackRock's UK version, by contrast, seems to be more directly attacking the robotics theme.
Why are BlackRock US and BlackRock UK running different robotics products?
Perhaps the retail-leaning nature of the US ETF market means its easier to offer a more vanilla tech sector-style robotics play. We see a similar dynamic within smart beta: institutional-targeting factor ETFs, like Soc Gen's deep value SGVB, look very different to retail-targeting value ETFs. Or, perhaps, with three US robotics ETFs already on the market, BlackRock had to offer a different interpretation of the theme. And, in BlackRock's defence, the US and UK products do have slightly different names (the UK version is called the "iShares Automation & Robotics UCITS ETF", suggesting software automation rather than AI).
Whatever the reason, BlackRock seems to be playing the different markets differently.