AdvisorShares launches drone ETF
AdvisorShares, an actively managed ETF specialist known for its novel ideas, is launching an ETF that invests in US companies making drones.
The AdvisorShares Drone Technology ETF (UAV) will be actively managed. It invests in companies driving the “drone economy” – which are small flying robots that are often used to transport or photograph things.
While drones are used in industry to a small extent today, they are expected to grow exponentially this decade. End uses include delivering packages, fertilising fields for farmers, on construction sites and in law enforcement.
To be included in the fund, companies must make more than 50% of their revenue from researching, making or supporting drones. AdvisorShares indicates that it will prefer companies that are market leaders with strong growth prospects when making stock selections.
The fund charges 0.99%.
Bernie commentary – sure, why not
There used to be a drone ETF: the ETFMG Drone Economy Strategy ETF (IFLY). But it was transformed into the Wedbush ETFMG Global Cloud Technology ETF some years back, effectively ending drone ETFs. Today’s launch is giving this theme another crack.
The first question I’ve inevitably got to ask is why active management? There’s every evidence that drone technology makers can be indexed. After all, there’s plenty of pure plays and they are clearly identified. You don’t need anything fancy to build an index here. I reckon the guys at Solactive or Bita would put together an index of drone making companies for a pretty low fee too. So the active decision is a bit puzzling. Although I think active management can be used to explain higher fees.
The second question I’d have is why just the US – and I think I know the answer. After the US, China is the largest maker of drones. The problem: Chinese drone makers are all on that list of companies sanctioned by the US Treasury, meaning the fund cannot buy them. Once you take out Chinese drone companies, the global industry is US-dominated anyway.
The final question I’d have is how sold are we on drones as a theme? My finger in the air says not very and that it is just a niche within robotics. However performance may prove me wrong.