Thematic Tech ETFs: Nitche Plays With A Future?
Written by Drew Voros
One of the big changes that exchange-traded funds have brought to investors is the ability to invest in a particular technology, rather than trying to pick a singular tech company, which we know can be a loser’s game.
...The ability to invest in the potential of a robotic revolution is offered in one of the sleeper ETF hits of the year.
- The ROBO Global Robotics and Automation Index ETF (ROBO)...
- has received $263 million in new assets this year, bringing its total AUM to $402 million
- and the 3 ½-year-old fund is up 11.8% for the year, to boot, and up 34% over the past 12 months...
- The Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ)...
- has attracted $50 million in assets since it was launched last September
- has a cheaper expense ratio, 0.68%, compared with ROBO’s 0.95%,
- and is up 15.5% for the year and has gained 17.65%since inception.
- The Global X Lithium & Battery Tech ETF (LIT)...
- is nearly seven years old,
- has seen $30 million in new assets this year, a 24% increase, taking its total to $162 million
- and has outperforming the crowd with a 15.3% gain year-to-date, and a 34% return in the past 12 months.
The importance of robotics and battery technology in our 21st century lives is undeniable, which certainly has been behind the attraction of these funds. There is real growth potential for these industries, and they are not difficult businesses to understand. The head-scratcher is that there are no competing funds with these two niche plays but the lack of copycats may also have something to do with how difficult it is to attract the assets ROBO has seen this banner year after launching 3 ½ years ago and, after seven years, LIT has just crossed over $160 million in assets.
- PureFunds ISE Cyber Security ETF (HACK)...
- debuted in November 2014,
- has nearly $1 billion in AUM...
- and is up 11.65% this year, and 24.55% over the last 12 months.
Charts courtesy of StockCharts.com
- First Trust Nasdaq Cybersecurity ETF (CIBR )...
- was launched during the summer of 2015,
- and has $212 million in assets.
- HACK and CIBR have performed similarly this year, with HACK up 11.65% to CIBR’s 11.22%. For the past 12 months, CIBR has a performance edge of 25% to HACK’s 21%.
There are a few other thematic tech ETFs that are making it up the asset hill to various degrees of success.
- PureFunds ISE Mobile Payments ETF (IPAY)
- offers investors a digital pay play,
- and after nearly two years, it has attracted $88 million in assets,
- while gaining an 8.5% return year-to-date and 16.30% in the last 12 months...
- PureFunds Drone Economy Strategy ETF (IFLY)...
- was launched 1 year ago and
- has already has $11 million in assets.
- Amplify Online Retail (IBUY )...
- has $10 million in AUM.
Both funds have seen about half the returns year-to-date and over the last 12 months as the other funds mentioned. Their time may certainly come (These two may go hand in hand one day as a play as Amazon and other online retailers are very serious about using drones for delivery.) but, as we have seen from LIT, patience is a virtue for ETF issuers, and it can be a flaw if assets never come around.
There are other thematic tech ETFs that haven’t moved beyond their seeding funding of $2.5 million in assets.
With every new thin slice of the market that ETFs serve up, there is usually eye-rolling and the feeling that there are too many ETFs but, as seen above, these niche plays do sometimes attract meaningful assets and solid returns - but make no mistake, the slog is real.
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