ETF Securities’ robotics ETF to convert to physical; TER trimmed

Sep 2nd, 2016 | By | Category: ETF and Index News

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London-based exchange-traded fund issuer ETF Securities has announced that its ROBO Global Robotics and Automation GO UCITS ETF (LSE: ROBO) will convert into a physically backed ETF, effective from 16th September. The ETF, which is currently synthetically created, will also see its total expense ratio (TER) trimmed from 0.95% to 0.80% thanks to savings from taking out the swap cost.

ETF Securities lowers TER on global robotics ETF

ETF Securities is converting its global robotics and automation ETF into a physically backed product and cutting the TER.

Physically backed ETFs, also known as physically replicated, buy the underlying index holdings whereas synthetic or swap-based ETFs gain exposure to an asset class using swaps.

Commenting on the announcement, Howie Li, Co-Head of Canvas at ETF Securities, said: “The ROBO Global Robotics and Automation product is now well established, with around $80m [as of 30 August 2016] in AUM since its listing nearly two years ago. By making the product physically-backed and cutting the TER, we are responding to investor demand to make this increasingly important investment theme more accessible to a broader range of European investors.”

The fund has pulled in assets steadily since its launch in October 2014, but the case for investing in robotics and automation is strong. The industrial revolution of the 1800s, the rise of services industries in the 1960s and the internet age of today have unleashed waves of innovation and new wealth creation. Rapid advances in technology are enabling robots to perform highly sophisticated and delicate knowledge-based work, widening their application to an incredible array of industries and applications.

As labour costs rise and the price of automation falls, companies are approaching the tipping point for the rapid adoption of robotic technologies. Ageing populations and shrinking workforces will accelerate this trend.

According to Li: “We believe the world is in the early stages of a transformational new economic revolution, driven by the increasing adoption of sophisticated robotics and automation technologies across all aspects of industry and day-to-day life. ROBO, which we developed with ROBO Global, a recognised leader in robotics and automation investment solutions, offers investors a simple, liquid, risk adjusted and cost effective way to gain access to this automation and robotics megatrend. The move to physical-replication and cost reduction should further enhance investors’ interest and access to this opportunity.”

ROBO is the only European-listed ETF to provide exposure to the equities of firms in the robotics and automation sector.

The underlying index for the fund is the ROBO Global Robotics and Automation UCITS Index. The index classifies eligible global companies as either “bellwether” equities – companies where the majority of business is related to robotics and automation – or “non-bellwether” equities – companies that have a distinct portion of their business involved in robotics and automation. The index allocates 40% to “bellwether” and 60% to “non-bellwether” firms.

As of 31 August 2016 the index had 80 constituents, with significant exposure to the US and Japan (approximately 30-35% of the composition each), while Taiwan and Germany offer around 7% of the composition each. The largest holding is Yushin Precision Equipment (2.2%).

Year-to-date (31 August) the index is up 11.6%, and 79.1% over the past five years.

Source: ETF Securities.

The fund trades on the London Stock Exchange in US dollars, British pounds or euros.

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