Travis Briggs: ROBO Global was founded more than four
years ago. We created the first index to track publicly traded companies
on a global basis that focus on robotics, automation and artificial
intelligence, which we refer to by the acronym RAAI. At the time we
created the ROBO index, it was obvious to us that it could potentially
be a multi-decade growth opportunity and a way for investors to
capitalize on the present and future growth of the global economy. We
saw a lot of different factors at play that led us to believe that
robotics and automation were going to be on a higher growth curve--more
than just your general market indices. That was the easy part.
The difficult part, or where the hard work began was, if we recognize this as an outstanding growth opportunity, how do we make sure that we capture that growth in an index? How do we capture that growth for investors? And four years ago there was no classification or Global Industry Classification codes for robotics and automation. You couldn't go into FactSet and say, "Show me the robotics companies."
So essentially, we had to start from scratch and build out the ecosystem or define the entire value chain of robotics and automation. What was critical to getting this off the ground was to bring in not only the financial experts, but the industry experts--the entrepreneurs and pioneers of the field that could help us really define the universe of robotics and automation. And the result is really interesting.
We ended up with a classification system of 12 different subsectors--essentially dividing the value chain into two primary categories.
One being the technologies--the enabling technologies of robotics and automation, which make up about half of the index. Those enabling technologies include sensors, processing, machine vision, computing and actuation. The actuation is the set of components that allow robotics to actually move.
Wally Forbes: Fascinating.
Briggs: What we've found--having the hindsight of watching this for four years--is that one of the true benefits of this index and how it was constructed is that you’re really looking at a multi-decade growth opportunity. We've tried to diversify it and capture the entire value chain, which will allow the investor to experience the smoothest, least volatile ride while the industry continues to expand.
So, one of the benefits that we've noticed over the last four years is that diversification not only comes from the market capitalization, the geography and the pure number of names, but also from the subsectors themselves. These subsectors are all underneath the overarching umbrella of robotics automation and artificial intelligence, yet they all have independent drivers, or macro factors, that are moving their individual growth trajectories.
For example, we've seen year-over-year increases in industrial manufacturing of robotic purchases. And that's simply a function of the need for improved productivity and quality. What you see in health care is the continuing rise in costs and an aging population together with the need for better patient outcomes. So, you're seeing the robotics in there continue to expand.
Another one, a surprising subsector that we probably wouldn't have been able to predict, is logistics automation. In the four years I've been watching the track record of this index, logistics automation has by far been our best performing subsector.
This is what blows me away though. You can say that that's been our best performing subsector for four years. But what does it look like going forward? Here are a couple of things that I can point out. One is that the total percent of retail spent online today is around 8%. That was a very surprisingly low number to me. We envision that can only continue to grow. And then on the flip side, if you look at the warehouses around the U.S., roughly 5% are either fully or even partially automated. So, there's a lot of room to grow on that end as well.
That's an example of the different factors that are driving these subsectors and making portfolio diversification critical.
The benefit of diversification is that you have these disruptive technologies all defined in 12 different subsectors. And while one or two of them may not be performing the way we think they could or should--especially given market conditions or different impacts in the industry--the diversification in this index still provides investors with a smooth ride.
The difficult part, or where the hard work began was, if we recognize this as an outstanding growth opportunity, how do we make sure that we capture that growth in an index? How do we capture that growth for investors? And four years ago there was no classification or Global Industry Classification codes for robotics and automation. You couldn't go into FactSet and say, "Show me the robotics companies."
So essentially, we had to start from scratch and build out the ecosystem or define the entire value chain of robotics and automation. What was critical to getting this off the ground was to bring in not only the financial experts, but the industry experts--the entrepreneurs and pioneers of the field that could help us really define the universe of robotics and automation. And the result is really interesting.
We ended up with a classification system of 12 different subsectors--essentially dividing the value chain into two primary categories.
One being the technologies--the enabling technologies of robotics and automation, which make up about half of the index. Those enabling technologies include sensors, processing, machine vision, computing and actuation. The actuation is the set of components that allow robotics to actually move.
The other half of the index is what we call the
applications. The applications consist of end-use robotics. Think of industrial
manufacturing, logistics automation, consumer products, agriculture, health
care, energy, 3D Printing and surveillance. Collectively, you end up with an
index of 12 subsectors, 83 different companies. It is global in nature: 40%
U.S., 60% international. I think what's compelling to a lot of investors is
that there are 83 names across the globe. These have less than 2% overlap with
traditional market indices like the S&P 500 or even the MSCI ACWI.
Wally Forbes: Fascinating.
Briggs: What we've found--having the hindsight of watching this for four years--is that one of the true benefits of this index and how it was constructed is that you’re really looking at a multi-decade growth opportunity. We've tried to diversify it and capture the entire value chain, which will allow the investor to experience the smoothest, least volatile ride while the industry continues to expand.
So, one of the benefits that we've noticed over the last four years is that diversification not only comes from the market capitalization, the geography and the pure number of names, but also from the subsectors themselves. These subsectors are all underneath the overarching umbrella of robotics automation and artificial intelligence, yet they all have independent drivers, or macro factors, that are moving their individual growth trajectories.
For example, we've seen year-over-year increases in industrial manufacturing of robotic purchases. And that's simply a function of the need for improved productivity and quality. What you see in health care is the continuing rise in costs and an aging population together with the need for better patient outcomes. So, you're seeing the robotics in there continue to expand.
Another one, a surprising subsector that we probably wouldn't have been able to predict, is logistics automation. In the four years I've been watching the track record of this index, logistics automation has by far been our best performing subsector.
This is what blows me away though. You can say that that's been our best performing subsector for four years. But what does it look like going forward? Here are a couple of things that I can point out. One is that the total percent of retail spent online today is around 8%. That was a very surprisingly low number to me. We envision that can only continue to grow. And then on the flip side, if you look at the warehouses around the U.S., roughly 5% are either fully or even partially automated. So, there's a lot of room to grow on that end as well.
That's an example of the different factors that are driving these subsectors and making portfolio diversification critical.
The benefit of diversification is that you have these disruptive technologies all defined in 12 different subsectors. And while one or two of them may not be performing the way we think they could or should--especially given market conditions or different impacts in the industry--the diversification in this index still provides investors with a smooth ride.
Comments
Post a Comment