Is WisdomTree Cloud Computing ETF (WCLD) a Strong ETF Right Now?

Launched on 09/06/2019, the WisdomTree Cloud Computing ETF (WCLD) is a smart beta exchange traded fund offering broad exposure to the Technology ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

WCLD is managed by Wisdomtree, and this fund has amassed over $655.57 million, which makes it one of the larger ETFs in the Technology ETFs. WCLD, before fees and expenses, 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Operating expenses on an annual basis are 0.45% for this ETF, which makes it one of the cheaper products in the space.

The fund has a 12-month trailing dividend yield of 0%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

For WCLD, it has heaviest allocation in the Information Technology sector --about 91.40% of the portfolio.

Taking into account individual holdings, Definitive Healthcare Corp (DH) accounts for about 2.12% of the fund's total assets, followed by Sprout Social Inc - Class A (SPT) and 2u Inc (TWOU).

WCLD's top 10 holdings account for about 19.4% of its total assets under management.

Performance and Risk

So far this year, WCLD has lost about -45.22%, and is down about -54.74% in the last one year (as of 09/05/2022). During this past 52-week period, the fund has traded between $25.93 and $65.33.

WCLD has a beta of 1.17 and standard deviation of 41.59% for the trailing three-year period. With about 75 holdings, it effectively diversifies company-specific risk.

Alternatives

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 $622.65 million in assets, First Trust Cloud Computing ETF has $3.24 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.

Bottom Line

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.