Robotics-focused ETFs see big gains, Trump could hasten trend – MarketWatch

If robots are taking jobs, should you invest in the robot makers?

Thats the argument behind a pair of outperforming exchange-traded funds that track the robotics industry, which could continue seeing strong growth as more positions get automated by machines or algorithms.

In a Jan. 23 note, UBS named automation and robotics as one of the two areas of technological innovation that would drive productivity over the coming decade, along with the digital data industry.

Both have the potential to profoundly transform the structure of our economy, disrupt existing business models, but also create substantial growth opportunities for those well-positioned to participate, the firm wrote, singling out the ROBO Global Robotics & Automation Index ETF ROBO, -0.77% as a fund that would benefit from this trend, with the investment time horizon of a decade.

Another fund, the Global X Robotics & Artificial Intelligence Thematic ETF BOTZ, -0.76% is also tied to the automation trend.

While the funds could be seen as siding with the enemy, given how the loss of jobs is seen as a long-term crisis for the labor market, investors have taken to them of late, with their growing by significant margins. About $77.8 has moved into the ROBO fund since Novembers U.S. election, bringing its assets to $195.7 million, according to data from ETF.com, while $6.1 million has come into the Global X fund, accounting for about three-fourths of its total $8.1 million in assets.

The election was seen as a possible accelerator for the industry. While President Donald Trump made disappearing manufacturing jobs a centerpiece of his campaign, and the issue arguably tipped him into the White House, his victory could accelerate the trend.

Read: Amazon is going to kill more American jobs than China did

Trump has been critical of U.S. companies that outsource jobs to countries where labor costs are cheaper, calling them out specifically on Twitter. While this has resulted in some jobs not leaving the country, as well as other firms announcing domestic investments, if labor costs start rising because more jobs stay in the States, that could skew positive for the automation industry, said Jay Jacobs director of research for Global X Funds, who added that theres not a consensus on this yet.

Still, the funds have seen gains since the election. The ROBO fund is up 13.6% over the past three months while the Global X fund is up 10.5%. The S&P 500 is up 8.7% over that same period.

The move to automation is expected to continue regardless of government policy. According to Allied Market Research, the global industrial robotics market is seen growing at an compound annual growth rate of 5.4% through 2020, reaching a size of $41.2 billion by that point.

The trend could impact all manner of sectors. Last year, the White Houses annual economic report gave an 83% chance that automation will take a job with an hourly wage below $20. Andy Puzder, Trumps nominee for the position of labor secretary, has talked up the benefit of replacing human workers with technology saying that machines are always polite, they always upsell, they never take a vacation, they never show up late, [and] theres never a slip-and-fall, or an age, sex or race discrimination case. Puzder is the chief executive of CKE Restaurants Inc., which operates the Carls Jr. and Hardees fast food chains.

Even higher-paying jobs arent completely immune. Finance has seen the rise of robo advisers, while 12% of the holdings of the Global X fund are tied to the health technology sector.

A lot of people talk about automation with respect to manufacturing, and while thats a big issue this also impact military-related companies, medicine, with biomedical device makers, and of course transportation with self-driving cars, Jacobs said.

Nvidia, a leader in self-driving technology, announced partnerships with Bosch and Audi at CES 2017. Rob Csongor, Nvidia's automotive general manager, talked to MarketWatch about the company's promise to have a self-driving car on the road by 2020.

Such stats could make anyone fret about their job security, but the outlook isn't completely bleak, as far as machines taking over.

Given currently demonstrated technologies, very few occupationsless than 5 percentare candidates for full automation, wrote the McKinsey Global Institute in a report published in January. However, almost every occupation has partial automation potential, as a proportion of its activities could be automated. We estimate that about half of all the activities people are paid to do in the worlds workforce could potentially be automated by adapting currently demonstrated technologies.

The most susceptible activities, it said, were in highly structured and predictable environment, as well as data collection and processing.

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Robotics-focused ETFs see big gains, Trump could hasten trend - MarketWatch