Rise of the Robots

USA

Another robotics and automation ETF

The Bruce Bond-backed Innovator ETFs is listing a “frontier” tech ETF that targets new technologies. 

The Innovator Loup Frontier Tech ETF (LOUP) will invest in companies “that have the potential to have an outsized influence on the future,” the prospectus says.

In particular, LOUP will look for companies involved in any of the following themes:

1. Artificial Intelligence, which is defined broadly as companies providing automation and semi-automation services or products;
2. Consumer Perception, companies that enable vision and language processing. This includes sensors, laser arrays and semiconductors.
3. Robotics, which, which is, as with AI, defined broadly to include automation.
4. Autonomous Vehicles, which includes companies that make self-driving cars, ships and planes, but also those that make the components for said vehicles.
5. Immersive Virtual Reality, companies that build software and hardware for immersive or computer-simulated virtual reality experience.
6. Mixed/Augmented Reality, which are companies that “merge physical and virtual inputs to produce new environments and visualizations where physical and virtual objects co-exist and interact in real time,” the prospectus says.

In picking and weighting companies, LOUP looks for businesses listed in rich countries with market caps between $250 million and $250 billion – thus excluding mega and micro caps. It then selects companies that derive “a significant portion of their revenues” from a frontier tech theme as those taking frontier tech “initiatives”.

Companies are then ranked according to: (1) revenue growth; (2) earnings per share growth; (3) free cash flow growth; and (4) acceleration in quarterly revenue growth. Companies' scores on each of the four metrics are equally weighted and are added together to create a composite ranking for each company.

All of the securities comprising the Index are equally weighted, except for the securities with the top 5 rankings, which are each weighted 50% more than the others.

Analysis – first-mover advantage in a market saturates

Robotics ETFs are all the rage these days – so much so that there are now several ETFs in the US that are targeting this niche, with more coming to market every quarter. (We list them below). The newfound love of robotics ETF listings fits a familiar pattern. An ETF sponsor comes along and takes the risk – in this case Robo Global – and proves that the niche can gather assets and perform. It then sparks copycats whose competitive edge is typically price-based.

Fortunately for risk-taking ETF sponsors, first mover advantage in the ETF industry is real and lasting. Despite a decade of under-pricing, SPY is still the world’s largest ETF. The same can be said for GLD and EEM. Which brings us to our question for LOUP: how does it plan to take on the incumbents that have the power of first mover advantage?

The market for innovative tech ETFs is virtually saturated. Here is a list of the products in this space, almost all of which have been listed in the last three years:

1. iShares Exponential Technologies ETF
2. Ark Invest’s ARK Innovation ETF
3. Knowledge Leaders Developed World ETF
4. SPDR FactSet Innovative Technology ETF
5. Direxion Robotics, Artificial Intelligence & Automation Index Bull 3X Shares,
6. iShares Robotics and Artificial Intelligence ETF
7. First Trust Nasdaq Artificial Intelligence and Robotics ETF
8. Global X Robotics & Artificial Intelligence Thematic ETF
9. ROBO Global Robotics and Automation Index ETF
10. AI Powered Equity ETF
11. ALPS Disruptive Technologies ETF

As to how LOUP plans to navigate this market we’ll have to see.

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Hong Kong

Money market ETF

CSOP asset management is listing a new money market ETF that looks like what are called cash ETFs elsewhere. The CSOP Hong Kong Dollar Money Market ETF (3053) track the 3-month HIBOR "Benchmark". The Fund invests in Hong Kong Dollar-denominated and settled short-term deposits, money-market instruments and debt securities. The fund will be available in both CNY and HKD.

Korea

Samsung lists Kospi Put Write ETN

Korean chaebol Samsung is listing a new ETN that seeks to provide income by selling the nearest month contract securities of the KOSPI200 put options, the Samsung Securities Samsung KOSPI PutWrite ETN 53 (530053)

Switzerland

Cross-listings:

iShares MSCI EM UCITS ETF USD Dist (IEEMCHF)

Other announcements:

ETF Stream has launched a new quarterly magazine that applies a fine-tooth comb to smart beta. The magazine interviews specialists and takes a deep dive on various factor indices and smart beta ETPs. The magazine is available here.