The WisdomTree Cloud Computing ETF (WCLD) was launched on 09/06/2019, and is a smart beta exchange traded fund designed to offer broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it’s possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
WCLD is managed by Wisdomtree, and this fund has amassed over $644.09 million, which makes it one of the larger ETFs in the Technology ETFs. Before fees and expenses, WCLD seeks to match the performance of the BVP NASDAQ EMERGING CLOUD INDEX .
The BVP Nasdaq Emerging Cloud Index is an equally weighted Index, designed to measure the performance of emerging public companies focused on delivering cloud-based software to customers.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund’s return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the cheaper products in the space, this ETF has annual operating expenses of 0.45%.
WCLD’s 12-month trailing dividend yield is 0%.
Sector Exposure and Top Holdings
It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 86.10% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Telecom round out the top three.
Taking into account individual holdings, Elastic Nv (ESTC) accounts for about 1.91% of the fund’s total assets, followed by Zscaler Inc (ZS) and Crowdstrike Holdings Inc – A (CRWD).
Its top 10 holdings account for approximately 17.07% of WCLD’s total assets under management.
Performance and Risk
The ETF return is roughly 22.37% and is up about 23.06% so far this year and in the past one year (as of 11/21/2023), respectively. WCLD has traded between $23.72 and $34.49 during this last 52-week period.
WCLD has a beta of 1.10 and standard deviation of 41.46% for the trailing three-year period. With about 71 holdings, it effectively diversifies company-specific risk.
WisdomTree Cloud Computing ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
Global X Cloud Computing ETF (CLOU) tracks INDXX GLOBAL CLOUD COMPUTING INDEX and the First Trust Cloud Computing ETF (SKYY) tracks ISE Cloud Computing Index. Global X Cloud Computing ETF has $568.15 million in assets, First Trust Cloud Computing ETF has $2.71 billion. CLOU has an expense ratio of 0.68% and SKYY charges 0.60%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.