Investing in the rise of robotics
The robot revolution is all but inevitable. But it won’t involve dystopian cyborg armies marching on our cities – instead, it is more likely to take the form of factory automation, self-driving cars, drone technology and ‘smart’ household help.
International Federation of Robotics (IFR) World Robotics Report has estimated that the number of household robots will rise by 31 million worldwide by 2019, reaching a value of $13 billion while various reports predict the value of the robotics market to sit anywhere between $135.4 billion by 2019 and $226.2 billion by 2021.
Whichever way you look at it, robotics is a growing sector, and automation will soon become a part of everyday life for a lot of people across the world. So how do you profit from the rise in robotics, before the market really takes off?
- Direct investments
Robotics start-ups have been gaining a lot of interest in Silicon Valley over the past year or two, as established companies use mergers and acquisitions to bring the emerging technology into their firms. Tesla has hired hundreds of ‘Kuka’ devices to build its latest vehicle, while Amazon was at the forefront of drone technology. The early success of these prototypes, and the influx of cash they attract, has inspired a glut of innovation in the field of robotics. A record-breaking $1.95 billion was invested in robotics start-ups in 2016 alone, largely from Venture Capitalists and angel investors.
If you don’t have millions to spend on a direct robotics investment, crowdfunding sites such as Indiegogo and Kickstarter allow you to invest in up-and-coming projects for just a few hundred dollars. While it might be tempting to get in on the ground floor and invest in an original invention, it is a risky strategy. Direct investments are generally unregulated and unsecured, so you could lose everything if the project doesn’t come to fruition.
- Indirect investments
It is a lot easier, and a lot safer, to invest in robotics indirectly through managed funds, exchange traded funds (ETFs) and stocks and shares. But since it is such a new sector, there are not many options yet.
The popular Pictet Robotics Fund closed to new investors earlier this year, after reaching €3 billion in assets in less than two years, but there are still a few funds out there that specialise in artificial intelligence and tech innovation. The Polar Capital Global Technology Fund has some exposure to the robotics sector through its investments in cutting-edge tech companies, and the recently-launched AXA World Funds Framlington Robotech Fund has pledged to allocate at least two thirds of its assets in companies which operate within the realm of robotics.
Blackrock’s Rob Powell discusses thematic robotics ETFs
ETFs offer an easy way to track an entire sector or market with just one investment. The Nasdaq-listed Robo Global Robotics and Automation Index ETF and London Stock Exchange-listed ROBO Global Robotics and Automation GO UCITS ETF are two of the most established robotics-focused ETFs, and have returned 36.12% and 37.06%, respectively, in the 12 months to June 2017.
Use our ETF screener to discover the robotics ETFs available on the IG platform.
Both of these ETFs invest in on-the-ground robotics innovators with an emphasis on industrial automation, technology, and healthcare. However, only one of them – the ROBO Global Robotics and Automation GO UCITS ETF – is currently eligible for inclusion in a Stocks and Shares ISA investment, making all returns tax-free.
The main benefits of ETFs are that they offer low-fee access to a diversified portfolio of investments, which spreads your risk and potential reward. But if you want to put your money in one company in particular, you may prefer to invest in one of the many tech-focused companies, which are on the front line of the robotics revolution.
Tesla, Google, Siemens and Amazon have invested heavily in the sector over the past few years, and their executives have been very open about their automation plans for the future. Alternatively, you could invest directly in robotics-focused companies such as iRobot Corp, Raven Industries, Daifuku Co, and Cognex Corp.
Since this is such a new and rapidly-developing industry, it is worth keeping an eye out on company launches or changing allocations within fund and ETF portfolios — if they drift from their original remit they may no longer represent the robotics investment that you initially wanted.
Above all, make sure that you protect your money as best as possible, by choosing established investments with a decent track record, which are regulated by a respected body. And if you still aren’t sure about whether or not you are investing in the right place, you could always enlist the services of a professional investment robo-advisor.