Horizons ETFs has launched the Horizons Robotics and Automation Index ETF (ROBO CN) on the Toronto Stock Exchange (TSX), the first ETF listed in Canada to offer thematic exposure to the robotics and automation industry.

Steve Hawkins, president and Co-CEO of Horizons ETFs.

Steve Hawkins, president and Co-CEO of Horizons ETFs, commented: “We could be witnessing the most transformative technological change of our lifetime as robotics and automation start to become integral to much of what we do on a daily basis. Despite the quick ascendancy of the robotics, automation and artificial intelligence sectors, it’s still in its very early days. This could be the largest untapped investment opportunity for Canadian investors, particularly since very few likely own these stocks in their equity portfolios.”

The ETF will track the ROBO Global Robotics and Automation Index. Comprising 84 companies representing the global value chain of robotics, automation and enabling technologies, the index follows a modified equal weighting scheme to reduce company-specific risk. Constituents are chosen by a panel of industry experts and are categorised as ‘bellwether’ or ‘non-bellwether’.

Bellwether companies are well established leading players, whose core business is directly related to robotics and automation. Non-bellwether companies are those that derive a significant portion of their revenues from the industry and have the potential to grow through innovation and market adoption. Bellwether and non-bellwether stocks are allocated 40% and 60% of the index respectively, and within these weighting segments, each constituent is equally weighted.

Travis Biggs, CEO of ROBO Global, said: “We’re excited to partner with Horizons ETFs to potentially enhance the portfolios of Canadian investors, by giving them an easier way to access the sector of robotics, automation and artificial intelligence. We feel Horizons ETFs is an excellent partner, based on their success in bringing innovative ETF solutions to Canadians.”

As of 30 November, the index is broadly equally weighted between companies that manufacture or provide services related to machinery, equipment or sensors supporting a robot performing its task and companies that use robots and automation technology in their manufacturing process to improve efficiency.

The US and Japan are the dominant country exposures with 43% and 29% of the index weight respectively, followed by Taiwan (6%), Germany (5%) and Switzerland (4%). Current largest holdings include Harmonic Drive Systems, Cognex, Fanuc, Raven Industries and Hollysys Automation.

The index has returned 47.2% in the year to 30 November 2017. ROBO is physically replicated and hedges its currency exposure between the US and Canadian dollars. The ETF has a management expense ratio of 0.75%.

Investor demand for the new ETF is unlikely to be in short supply given the large flows gathered by other thematic ETFs tracking the robotics sector this year. Investors in Europe and the US can access the same ROBO Global index through ETFs provided by the recently-acquired ETF Securities and Exchange Traded Concepts respectively. The new Canadian ETF will be the cheapest way to access the index – the European version costs 0.80% and the US version costs 0.95%.