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WisdomTree's Cloud ETF on Deck

Sanghamitra Saha

As the rush to launch a cloud-computing ETF is increasing, WisdomTree decided to jump on the bandwagon. It came up with a cloud computing ETF on Sep 6. Below we highlight the fund in detail and see if it can see success in the coming days.

Inside Wisdomtree Cloud Computing Fund (WCLD)

The fund looks to track the price and yield performance of the BVP Nasdaq Emerging Cloud Index, an equally-weighted index designed to measure the performance of emerging public companies focused on delivering cloud-based software to customers. WCLD gives exposure to U.S.-listed cloud companies (including ADRs) and charges 45 bps in fees.

No stock accounts for more than 2.62% of the portfolio. Box Inc - Class A, Docusign Inc and Carbon Black Inc are the top three holdings of the fund. The fund is totally heavy on Information Technology (98.04%), with the remaining exposure going toward Health Care.

How Does It Fit in a Portfolio?

Cloud computing is a process in which data or software is stored outside a computer, but can be easily accessed anywhere, anytime via the Internet. This idea is highly effective as it helps firms lower IT costs by eliminating the need for servers and related maintenance costs.

Also, it provides greater accessibility. Since everything is on the Internet, users can access any data or document any moment. Needless to say, such advantages will make it a thing of tomorrow.

Global investment in cloud services has increased by leaps and bounds in recent years as more companies have opted for online infrastructure provided by the likes of Amazon AMZN, Microsoft MSFT and Alphabet GOOGL.

Research firm Gartner expects that by the end of 2019, “more than 30% of technology providers' new software investments will have moved from cloud-first to cloud-only.” Though most organizations do not possess a formal cloud strategy still now, 70% of the organizations will have one by 2022, per Gartner.

In a report released in April 2019, Gartner projected that the worldwide public cloud services market will likely grow 17.5% in 2019 to total $214.3 billion, up from $182.4 billion in 2018. Currently about 19% of cloud budgets are disbursed on cloud-related services, such as cloud consulting, implementation, migration and managed services, and Gartner expects that this share of investment will rise to 28% by 2022.

Competition

The space is gradually getting teeming with products. The biggest fund in the space is First Trust ISE Cloud Computing Index Fund (SKYY), which is a $2.22 billion-fund and hit the market in mid-2011. It charges 60 bps in fees.

There is another fund, Global X Cloud Computing ETF CLOU, which entered the market in April 2019 and has amassed about $506.5 million in assets so far. It charges 68 bps in fees.

Tortoise launched a product in late January 2019, namely Tortoise Cloud Infrastructure Fund TCLD, which charges 0.40% in expense ratio. TCLD’s underlying index takes into account large firms with smaller cloud-based companies, percentages of revenues of which however are prevailing in the industry (see all Technology ETFs here).

As WisdomTree fund charges pretty competitively, we expect the fund to see success in garnering assets in the coming days.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
First Trust Cloud Computing ETF (SKYY): ETF Research Reports
 
Global X Cloud Computing ETF (CLOU): ETF Research Reports
 
Tortoise Cloud Infrastructure Fund (TCLD): ETF Research Reports
 
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