ROBO nets $100m as Aussie thematic ETFs take off

ETF Securities’ ROBO has become the first thematic ETF in Australia to hit $100m.

ETF Securities’ Global Robotics and Automation ETF (ROBO) has scooped up $100 million in assets, becoming the first Australian thematic ETF to reach the nine-digit milestone.

The fund – which was launched only 9 months ago – is ETFS’ second product to hit the $100m mark, after GOLD, the company’s headline fund and the world’s first gold ETF.

“While Australian investors are often maligned for their failure to consider impressive opportunities in overseas markets, their response to ROBO is nothing short of outstanding and clearly shows that ETFs are becoming a core part of many portfolios,” Kris Walesby, the Head of ETF Securities Australia, said in a press release.

The fund tracks an index provided by ROBO Global, the US-based research group and index specialist. The index is unusual in that it saddles a grey line between active and passive management.

Robotics and AI are not official sectors (under GICS), meaning ROBO Global does its research and actively decides which companies fit the bill. The research involves interviewing bosses, visiting companies’ headquarters, and setting analysts upon earnings reports.

But the index is also passive in that it takes a rules-based approach to weighting companies. Its rules overweight small and mid caps, reflecting the view that smaller companies are more innovative than large bureaucratised multi-nationals. It then ensures diversification by bringing constituents into near-equal weight.

ROBO’s assets have climbed as part of the broader tech boom – particularly in the US and China – which has seen the tech sector and tech-related funds strongly outperform the wider market since the 2008 financial crisis. Surging returns on small and mid cap stocks have also given ROBO a lift, and the fund has delivered a return of 18% since launch. There are no Australian companies in the index at the time of writing.

“Companies are increasingly investing in automation as they seek to improve productivity; reducing production costs and, in turn, increasing profitability. Already generating more than $200 billion annually, sales in the robotics and automation sectors are tipped to increase more than five-fold over the next decade,” Mr Walesby said.

“Currently, more than two-thirds of industrial robots are employed in the automotive, electronics and metal industries, but their use is likely to become more widespread as artificial intelligence systems develop further.”

The success of ROBO also forms a landmark for thematic ETFs in Australia. Thematic ETFs -which target investment themes and trends like aging population, cybersecurity – have proved popular overseas. Yet in Australia they have been on a slower burn, until now.

The success of ROBO in Australia mirrors the success of robotics ETFs overseas. ETFs that track ROBO Global’s index in the US and UK – provided by white-labeller Exchange Traded Concepts and LGIM, respectively – have $2.3 and $1.2bn under management respectively.

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