Each week a team member from Nasdaq Global Indexes provides insight into what is happening across a variety of investment theses. From index and ETF performance, to analysis of market trends, our experts will cover what’s hot in the world of passive investment strategies.
This week, Mark Marex, CFA, discusses the Nasdaq CTA Artificial Intelligence & Robotics index (NQROBO) and its performance:
- The Nasdaq CTA Artificial Intelligence & Robotics index (NQROBO) is a modified equal-weight index created by Nasdaq in partnership with CTA. It seeks to track the top AI or robotics companies worldwide, and as of August 31, 2020, has 102 constituents.
- CTA selects the index’s constituents by ranking the top firms across three categories: Enablers (25% of index weight), Engagers (60% of index weight) and Enhancers (15% of index weight). The index is reconstituted semi-annually and rebalanced quarterly. The nature of the index being AI and robotics, the largest sector weight in the index is Technology at nearly 50%, while the second-largest is Industrials at nearly one-third – substantially more than its share of the Nasdaq-100 (NDX).
- The top 40 members of NQROBO represent about 80% of the index weight, with electric car companies Tesla and NIO by far the best YTD performers.
- Strong performance is a trend across the index, as only a handful of companies have registered negative YTD performance, while the vast majority of constituents fall between 20-60%.
- Index constituents allocate a large portion of funds towards Research and Development; in aggregate, these companies spend approximately 10% of their annual revenues on R&D.
- 74 companies had at least 1 patent filed in the last 12 months that related to 1 or more of 35 Disruptive Technologies, as tracked by Yewno. 67% of global Robotic Surgery patents were filed by companies in the index, with other sub-themes in Robotics similarly strong. AI R&D also appears quite strong, having generated more than 50% of patent activity in Deep Learning and Natural Language Processing. Adjacent sub-themes, like Internet of Things, Virtual Reality and Augmented Reality had strong showings as well.
- Thanks to the weighting scheme of the index, the year-to-date performance of NQROBO has been less dramatic than the Nasdaq-100 or the Nasdaq Composite, but it still meaningfully outperformed the S&P500 by roughly double.
- For investors, the ETF AUM has risen to nearly $150 Million, up almost 70% from the late March 2020 lows. This is mostly driven by First Trust’s ETF (Ticker: ROBT) tracking the index in the US, as well as a couple Asia-listed products from Cathay (Taiwan: 00737) and Ping An (Hong Kong: 3023).