All three ETFs have trailed lower expense, broader index ETFs at expense ratios that could make it difficult to justify investment, but in the final analysis, sorry, ROBO, you're replacing jobs but not other oddball ETFs (at least, not yet).
On behalf of all Luddites, we think the jury is still out on this concept as one that can be truly defined in an ETF context. ROBO has been the big winner in attracting assets—though that's no surprise with the popularity of tech.
It's hard to make exact comparisons, but FLAG is a large-cap fund, and it's returned 15 percent in the past year, compared with a 21 percent return for the SPDR S&P 500 ETF. NASH is really a U.S. small-cap equity fund, and its 8.7 percent return compares to a 23 percent return for the Schwab US Small Cap ETF (SCHA). ROBO's 8.6 percent return since inception compares to a 13.2 percent return for the PowerShares QQQ technology index ETF—an imperfect comparison, but that's ROBO's challenge. And if we compare ROBO to the Vanguard Industrials ETF (VIS), it fell short of the industrials sector's 12 percent return since the ETF's inception data. It also has the highest expense ratio of the three ETFs.
In the world of the tech utopians, every trend is always "five to 10 years out" from changing the world—that includes driverless cars and flying cars and the like. We may wait another five to 10 years before deciding that it's time to put robots alongside the Nasdaq 100.
Speaking of the five to 10 year outlook, we did ask for a "consolation match" response from the ROBO-Stox management team, and they suggest waiting five to ten years will mean missing out on the big returns.
By email the ROBO-Stox team said, "Almost every research report forecasting the next 5-10 years shows the following:
- Industrial robotics worldwide is growing at a 9 percent compound annual growth rate .
- Non-industrial robots in general are growing at 17+ percent
- Mobile robots are growing at 12.6 percent
- Consumer robotics at 17 percent
- Underwater robotics at 11 percent
- Surgical robotics at 13 percent
They also noted, "The index was created precisely because there was no relevant benchmark available. ... Robotics and automation began primarily in the industrial sector, as such, a large portion of the publicly traded robotics companies still fall within this area of the market ... The index continues to add new non-industrial companies within the health care, energy, and information technology sectors. While 50 percent of the index falls within the industrial sector, we believe that balance will ultimately change to less than a third.
"The objective is not to pick winners and losers, but instead be as inclusive as possible. This is the best approach for an industry in its early stages. There will be tremendous creative destruction to come," ROBO-Stox management wrote.
[Correction: This story has been revised to reflect that Deere and Accuray are holdings, not top 10 holdings, in the Global Robotics & Automation Index ETF. Industrials and technology stocks comprise approximately 83 percent of the ETF, with no financial services or utilities holdings. The ETF's performance versus the Vanguard Industrials ETF and PowerShares QQQ ETF is relevant since its inception date on October 22, 2013, not the previous one-year period.]