Back to the future: ETF Securities and the rise of robotics investing

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It has been 30 years since Terminator, Back to the Future and Small Wonder brought robots to the screen.

Three decades on from some of the most popular fictional robot characters driving the perception that they could bring significant improvement to human life, ETF Securities has partnered with Robo-Stox, the creator of benchmark indices,
to create and list exchange traded products providing exposure to the global robotics and automation sector.

The Robo-Stox Global Robotics and Automation GO Ucits ETF has listed on the London Stock Exchange, thereby becoming the first European ETF of its kind. Howie Li (pictured), co-head of Canvas, ETF Securities, worked for some 18 months on the project of an ETF investing in robotics, as part of the company’s search for diversification.

“We embarked on this project as part of our search for innovative products that provide diversification in global equities for our investors. We are very strong in commodities but we want to respond to our investors’ demands by adding to the solutions available in our Ucits equity range,” Li says.

Rapid advances in technology are enabling robots to perform increasingly sophisticated knowledge-based work. As this trend rises and labour costs increase, companies are starting to consider the adoption of robotics more concretely.

“The robotics story is an interesting one because it tells a story every one of us can relate to. There has been an increasing amount of media coverage on drones, automation and so on. Now people are increasingly interested in the
ability of robots and automation to improve their lives in domestic situations – look at the robotic vacuum cleaner for example,” says Li.

About 10 years ago, one of the founders of Robo-Stox requested his broker invest in a basket of robotic stocks. When this was not available, he started doing research and building a database of robotics and automation companies, which eventually led to the creation of the company’s global classification system.

It is this that has enabled the creation of a Ucits-compliant index, comprising over 80 stocks. Working together with ETF Securities has made robotics and automation easily investable.

“This is a diversified approach to robotics investing. European investors are able to invest into the growth prospects of robotics whilst having equities exposure that is diversified across a broad range of industry sectors and geographies,” Li

Looking at the current sector breakdown, ETF Securities’ robotics investing is currently split between Industrials (47%) and Information Technology (33%). The rest is spread through Healthcare (11%), Energy (5%) and Consumer Discretionary (4%).

“Robots are starting to prove useful for carrying out difficult tasks for human beings. For instance, robots can now replace miners in highly dangerous situations. Or, in the healthcare space, robots could be helpful in assisting the
elderly,” Li argues.

According to him, this evolution is part of a long-term story in the growth of robotics investing. In the shorter term, it is expected that there will be some M&A activity in robotics and automation as well as growing companies contemplating
IPOs. “Of course robots won’t replace everything but it is undeniable that we are at a crossroads now where people are realising that robots are a reality in making our lives safer and more efficient,” Li adds.

When asked where he thinks the best opportunities for robotics investing will be in the near future, Li points to the US, Germany, South Korea and Taiwan.

“In the shortmedium term, tech hubs will remain concentrated in developed markets, but we will definitely witness more growth in robotics within emerging markets in the next five to six year,” he concludes.

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