Know what your robotics and automation investment is doing for you

Transcription

1 Know what your robotics and automation investment is doing for you By Richard Lightbound CEO ROBO Global Europe & Asia In this note, we want to highlight to potential investors in robotics and automation that not all investment products are the same. The robustness of the investment approach, the purity to the robotics and automation theme and the resulting portfolio holdings all have an effect on your overall investment portfolio (and sometimes with unintended consequences). Below, we will focus and elaborate on the following four considerations: 1. It takes dedicated experts many years to learn and understand the robotics ecosystem. Make sure the experts really know their stuff and come with a robotics pedigree. 2. We ve seen robotics investments that include common large cap equities and nonrobotic exposures. Understand how your robotics investments interact with the rest of your portfolio. 3. Robotics investment is about capturing a megatrend before the winning companies are clear. Position and diversify your portfolio so that it s focused on a pure robotics exposure whilst managing risk within that investment universe. 4. Robotic investment products come with different approaches and costs. Don t just look at the cost- make sure you re getting the value you want through a real exposure to robotics and automation with an appropriate performance track record. It takes dedicated experts many years to learn and understand the robotics ecosystem. Make sure the experts really know their stuff and come with a robotics pedigree. True robotics and automation companies are difficult to find through commonly used classification systems and their traditional investment sectors. It takes deep bottom-up analysis of companies and dedicated expertise in that field to understand from the top-down the technology and applications that are driving the robotics megatrend. Simple analysis of publicly-listed tech companies will not capture the robotics ecosystem. This is why we ve seen investment portfolios in robotics and automation differ widely and often with less commonality than expected. We believe that this all comes down to the approach and depth of understanding in what will drive the robotics megatrend growth. We focus on the interaction between technology (e.g. processing, actuation, computing, integration, sensing) and its applications (e.g. consumer products, agriculture, 3D printing, security, healthcare, logistics, manufacturing, energy) to bring investors a transparent approach to investing through the experience of a dedicated team of experts, academics, entrepreneurs and investment professionals. They are focused full-time and only on analysing the robotics and automation universe, identification of trends and understanding future growth opportunities. We track over 1,000+ private and public companies globally which is then screened through our proprietary ROBO Global Industry Classification system of 13 subsectors to bring an investible universe that identifies market leaders with strong growth prospects and revenue generation in robotics and automation. This classification system and our ROBO Global Robotics and Automation UCITS Index are maintained and managed by our leading team of experts- more information about the team is set out below including their individual stories ranging from the desire to invest in robotics (but previously couldn t) to developing the autonomous robots that makes Amazon efficient.

2 We ve seen robotics investments that include common large cap equities and non-robotic exposures. Understand how your robotics investments interact with the rest of your portfolio. It s puzzling to us when we see certain companies in a robotics and automation portfolio. Whilst the ecosystem does include certain large global brands as users of the technology or have a non-core branch that is developing robots, a lot of the opportunity and growth is actually in emerging companies. A lot of these are private and some are public small- and mid-cap companies. These companies develop the technology or deploy the technology to a product, service or manufacturing process to increase efficiency or productivity which are essential to the growth in the robotics megatrend. Our proprietary ROBO Global Industry Classification system and ROBO Global Robotics and Automation UCITS Index captures these companies to offer high-growth opportunities and low correlation to other common equity benchmarks. Often, investors are looking to robotics and automation for long-term growth but also for true diversification from other parts of their portfolio for an alternative source of return. We re confident that our index provides that to investors and would suggest looking at a robotics and automation portfolio more carefully to understand how it s managed and constructed. More importantly, investors should analyse how the holdings fit with their existing portfolio to minimise unintended consequences of correlation and overweighting certain large cap exposures that are found in equity benchmarks or holdings. For example, the ROBO Global Robotics and Automation UCITS Index carries a small 2% overlap with the S&P 500 or MSCI World Index offering investors unique exposure they are unlikely to be carrying in their portfolios today. Robotics investment is about capturing a megatrend before the winning companies are clear. Position and diversify your portfolio so that it s focused on a pure robotics exposure whilst managing risk within that investment universe. We strongly advocate an investment approach that differentiates the key contributors to robotics and automation versus those which have a relatively smaller focus (but still an important contributor). This allows for more emphasis towards companies which are strongly linked to the growth of this megatrend. At the same time, we are too early in this megatrend to clearly identify winners with confidence due to many competing technologies and the importance of securing patents effectively. Accordingly, we believe in an investment approach that maximises exposure to the growth of the robotics and automation megatrend and diversify portfolio risk by holding sufficient companies that focus on robotics in their core business. The ROBO Global Robotics and Automation UCITS Index provides a simple, transparent, cost effective and rules-based approach along with quarterly rebalances and a two-tier equal weight system. Within our equal weighting system, we currently have 22 bellwether (or pure play) companies which are well established market leaders in robotics and automation and 57 nonbellwether companies which have a smaller but distinct portion of their revenues devoted to robotics and automation which is positioned to rapidly grow as their products and/or services expand. Each bellwether carries approximately double the index weight versus a non-bellwether. The index is designed to bring stability to a high-growth industry through balanced diversification, currently across 79 companies and 15 different geographies. The small to medium market cap universe is where investors need exposure to truly capture the inherent growth opportunity from robotics and automation. The ROBO Global Robotics and Automation UCITS Index carries close to 80% of its portfolio within small to medium cap companies from around the globe. Traditional financial analysis by industry generalists will not capture the full universe of companies connected to the robotics and automation theme. In the same manner, strategies focused on large cap names with minimal association or purity to robotics and automation will miss much of the broader growth opportunity for investors and potentially lead to unintended over-exposure to a particular stock that may already be in an investor s portfolio.

3 Robotic investment products come with different approaches and costs. Don t just look at the cost, make sure you re getting the value you want through a real exposure to robotics and automation with an appropriate performance track record. Our ROBO Globa l Robotics and Automation UCITS Index is designed to (1) understand and define the sub-sectors and companies within the comprehensive ecosystem and (2) track the growth trend in play with relevant and diversified coverage. This bottom up and top down approach ensures we capture and measure the entire value chain and performance of robotics, automation and enabling technology companies across our 13 sub sectors and current 15 geographies. As stated above, this requires a deep understanding of the robotics and automation universe by robotics-only experts ranging from academics, entrepreneurs and investment specialists to bring an effective solution. We ve seen cheaper and more expensive robotics and automation investment portfolios that have been designed and constructed by generalists (although some claim to be specialists when they also cover other unrelated investment themes or megatrends as well). Robotics and automation investment cannot be done effectively by purely relying on systematic data analysis or financial analysis of tech companies. It needs a much more robust top down and bottom up approach that is entrenched by a deep understanding of the robotics ecosystem. So while you may find that costs may range widely when buying a robotics investment product, the purity and the robustness of the portfolio construction should not be underestimated. Within our team of experts, we ve been participating in the robotics space for over a decade with live index performance (licensed by ETF issuers) which illustrates a proven track record. In our ROBO Global Robotics and Automation UCITS Index, year to date performance (to 9 September 2016) is up 13.1%, the 3 Year EPS Growth is 51.6% and the Sharp Ratio is 1.5. The consistency of the longer term performance as well as the low correlation to other equity investments should be used to determine whether the investment is good value to investors. The stories of our individuals at ROBO Global ROBO Global is an established company and coverage team that exclusively focuses on helping investors understand, track and ultimately invest in the robotics and automation industry. One of our main co-founders, Frank Tobe, started his robotics research over a decade ago (and subsequently leading to ROBO Global ) because he wanted to invest in a basket of robotics and automation companies but no broker or index was able to direct him to this investment theme. ROBO Global realised early that it is challenging to track and gain risk-managed exposure to disruptive technologies such as robots. What is required is a deep interaction and understanding of the end-to-end ecosystem and intelligent oversight of technology advancement and the associated impact. To understand and track the robotics and automation investment theme, we assembled a full-time management team supported by a market leading advisory board. Across this coverage team, we have academic and research leaders as well as entrepreneurs and financial industry experts. The ROBO Global team is exclusively focused on analysing the robotics and automation ecosystem, identification of technology trends and understanding future growth opportunities. Our team has unique access and understanding of the companies, technology and associated industry partners. Members of this coverage team include: Professor Raffaello D Andrea s career is built on his ability to bridge theory and practice. He is a Professor of Dynamic Systems and Control at ETH Zurich, where his research redefines what autonomous systems are capable of. He is co-founder of Kiva Systems, now operating as Amazon Robotics, a robotics company that revolutionised material handling by deploying thousands of autonomous mobile robots in warehouses. His most recent awards include the IEEE Robotics and Automation Award and the Engelberger Robotics Award, two of the highest achievements in the field. Dr Wyatt Newman s research is in the areas of mechatronics, robotics and computational intelligence, in which he has 12 patents and over 130 technical publications. He received the S.B. degree from Harvard College in Engineering Science, the S.M. degree in Mechanical Engineering from M.I.T. in thermal and fluid sciences, the M.S.E.E. degree from Columbia University in control

4 theory and network theory, and the Ph.D. degree in Mechanical Engineering from M.I.T. in design and control. Morten Paulsen is the Head of Research and a Managing Director at CLSA Japan. He has covered the Japanese robotics and machinery industry as a Tokyo based equity analyst since Mr. Paulsen was among the first financial analysts to highlight the Asian Automation trend as an underlying driver for the sector one decade ago, and he has built strong relationships with automation equipment suppliers and system integrators across Asia. Louis-Vincent Gave is based in Hong Kong where, as CEO, he oversees GaveKal s money management business as well as contributing to the firm s research. He is the author of five books, including his latest Too Different for Comfort, published in October Chris Buck is head of capital markets and sales for ROBO Global US. He brings over 25+ years of experience in capital markets and sales. Prior to ROBO Global, he was Head of Client Execution Services, Americas ishares Capital Markets at BlackRock, where he was responsible for leading institutional and private wealth sales engagement across US, Canada, and Latin America. The investment challenge is how to gain maximum exposure to the robotics megatrend and manage risk appropriately in this high growth area. ROBO Global recognised the enormous growth prospects at an early stage and subsequently built the first and most comprehensive classification system and financial index capturing the full economic value of robotics, automation and enabling technologies. ROBO Global also owns and maintains a proprietary database of over 1,000 companies which are related to the robotics and automation ecosystem. The ability of the ROBO Global team to provide broad and diversified coverage of the end-to-end opportunity is inherent in our strategy. Today, the ROBO Global Robotics and Automation UCITS Index is the market leading benchmark for the industry, used across the US, Europe and Asia to create and track multiple financial products for investors.

5 Important Information Copyright 2015 by ROBO Global LLC. All rights reserved. ROBO Global is a registered trademark of ROBO Global LLC. Copyright 2015 by ROBO Global Partners Ltd. All rights reserved. ROBO Global is a registered trademark of ROBO Global Partners Limited. ROBO Global LLC and ROBO Global Partners Ltd are collectively referred to as ROBO Global. Redistribution, reproduction and/or photocopying in whole or in part are prohibited without written permission. This document does not constitute an offer of services in jurisdictions where ROBO Global does not have the necessary licenses. All information provided by ROBO Global is impersonal and not tailored to the needs of any person, entity or group of persons. The ROBO Global Robotics and Automation Index and the ROBO Global Robotics and Automation UCITS Index (the Indices ) are the property of ROBO Global who have contracted with Solactive AG to calculate and maintain the Indices. The Indices are not sponsored by Solactive AG or its affiliates. Neither Solactive AG, nor any of their affiliates will be liable for any errors or omissions in calculating the Indices. Closing prices for the Indices are calculated by Solactive AG based on the closing price of the individual constituents of the index as set by their primary exchange. Historical performance illustrations in the Indices are based on a backcast calculation. A backcast calculation can be materially different from a backtest analysis. Past performance of an index is not a guarantee of future results. The value of investments may go down as well as up and potential investors may not get back the amount originally invested. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index. ROBO Global makes no assurance that investment products based on the index will accurately track index performance or provide positive investment returns. A decision to invest in any such investment fund or other investment vehicle should not be made in reliance on any of the statements set forth in this document. ROBO Global is not in a position to give advice on the suitability of any investments for potential investors. Prospective investors are advised to make an investment in any such fund or other vehicle only after carefully considering the risks associated with investing in such funds, as detailed in an offering memorandum or similar document that is prepared by or on behalf of the issuer of the investment fund or other vehicle. Inclusion of a security within an index is not a recommendation by ROBO Global to buy, sell, or hold such security, nor is it considered to be investment advice. It is not intended that anything stated in this website should be construed as an offer or invitation to buy or sell any investment in any Investment Fund or other investment vehicle referred to in this website, or for potential investors to engage in any investment activity. No Investment Fund or other investment vehicle based on the Indices is sponsored, promoted, sold or supported in any other manner by ROBO Global or Solactive AG (the Index Parties ) nor do the Index Parties offer any express or implicit guarantee or assurance either with regard to the results of using the Indices and/or an Index trademark or an Index price at any time or in any other respect. The Index Parties use their best efforts to ensure that the Indices are calculated correctly. Irrespective of their obligations towards the Company, the Index Parties have no obligation to point out errors in the Indices to third parties including but not limited to investors in, and/or financial intermediaries of, any Investment Funds or other investment vehicles. Neither publication of the Indices by Solactive AG nor the licensing of the Indices or an Index trademark by ROBO Global for the purpose of use in connection with any Investment Fund or other investment vehicle based on the Indices constitutes a recommendation by the Index Parties to invest capital in any such fund or investment vehicle nor does it in any way represent an assurance or opinion of the Index Parties with regard to any investment in such fund or investment vehicle. These materials have been prepared solely for informational purposes based upon information generally available to the public from sources believed to be reliable. No content contained in these materials (including index data, ratings, credit-related analyses and data, model, software or other application or output therefrom) or any part there of (Content) may be modified, reverse-engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of ROBO Global. The Content shall not be used for any unlawful or unauthorized purposes. ROBO Global and its third-party data providers and licensors (collectively ROBO Global Parties ) do not guarantee the accuracy, completeness, timeliness or availability of the Content. ROBO Global Parties are not responsible for any errors or omissions, regardless of the cause, for the results obtained from the use of the Content. The content is provided on an as is basis. ROBO Global parties disclaim any and all express or implied warranties, including, but not limited to, any warranties of merchantability or fitness for a particular purpose or use, freedom from bugs, software errors or defects, that the content s functioning will be uninterrupted or that the content will operate with any software or hardware configuration. In no event shall ROBO Global Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Content even if advised of the possibility of such damages. ROBO Global Parties and their respective employees, affiliates and partners hereby exclude, to the extent permitted by applicable law, all liability in connection with the use of this website. The Global Industry Classification Standard (GICS ) was developed by and is the exclusive property and a trademark of Standard & Poor s and MSCI. Neither MSCI, Standard & Poor s nor any other party involved in making or compiling any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, Standard & Poor s, any of their affiliates or any third party involved in making or compiling any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.