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WisdomTree launches cloud computing ETF

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European ETF provider WisdomTree has added to its new thematic range with the launch of an ETF that aims to offer exposure to the cloud computing companies’ sector, The WisdomTree Cloud Computing UCITS ETF (WCLD).

Chris Gannatti, European head of research at WisdomTree says: “This cloud computing ETF is in some ways related to our Artificial Intelligence ETF in that it focuses on how people are dealing data and the fact that there is a lot of focus on data.”

Gannatti notes that firms have moved on from the idea that you have to have a server in a special server room, fulfilling the technological needs of companies.
 
“This ETF reflects how people want to engage in the future with all sorts of technology. People are realising that if you surrender some control and go to a cloud-based solution, you get all the benefits for just a monthly fee. It’s been remarkable to see how people have completely changed how they think about technology and all the services that are provided.”
 
 
Identifying cloud companies has been achieved through WisdomTree enlisting an expert partner.

“These companies aren’t simple to identify and it can’t be done by just going on a Bloomberg terminal and typing in ‘cloud companies’,” Gannatti says.

“We enlisted an expert partner, Bessemer Venture Partners, a venture capital firm which has experience in looking at early stage cloud companies that are not available in the public markets but are unique.”

BVP has partnered with Nasdaq to produce the BVP Nasdaq Emerging Cloud Index (EMCLOUD).

The ETF will invest in emerging public companies listed on the Nasdaq Stock Market, the New York Stock Exchange, NYSE American or the CBOE Exchange that are primarily involved in providing cloud software and services to their customers.

It will go through a rebalancing rules-based process twice a year to keep the index up to date in this fast-growing market, project to total nearly USD697 billion by 2025.
 
Gannatti says: “It’s interesting in that when we go around various jurisdictions in Europe, there’s lots of excitement around these technology focused ETFs because there is a broad understanding that first and foremost these AI or cloud-based services are becoming more ubiquitous.”
 
Even Office 365 is now a cloud-based solution, Gannatti, notes. “Whether you want to admit it or not cloud is invading our lives and at this late stage in the technology cycle, people are thinking that a broad technology fund may not be the way to cover this sector going forward. There is a stickiness to a lot of these cloud services which is counter intuitive but disrupts the things that companies used to do. If we go into a global slowdown, people are not going to go back to their manual methods.”
 
The new ETF has an expense ratio of 0.40 per cent.

BVP identifies companies as cloud computing businesses and eligible for inclusion if they derive a majority of its revenue from business-oriented software products through a cloud delivery model that is a subscription based, volume-based, or transaction-based offering.

The firms must also have attractive revenue growth, with new index constituents experiencing annual revenue growth of at least 15 per cent for each of the last two full fiscal years; existing index constituents must have grown revenue by at least 7 per cent in at least one of the last two fiscal years to remain eligible.
Liquidity constraints for eligible companies are that they must have a minimum market capitalisation of USD500 million and a minimum three-month average daily dollar trading volume of USD5 million.
 

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