Designed to provide broad exposure to the Technology ETFs category of the market, the WisdomTree Cloud Computing ETF (WCLD) is a smart beta exchange traded fund launched on 09/06/2019.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by Wisdomtree, WCLD has amassed assets over $622.44 million, making it one of the larger ETFs in the Technology ETFs. Before fees and expenses, this particular fund 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.
Annual operating expenses for this ETF are 0.45%, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 0%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For WCLD, it has heaviest allocation in the Information Technology sector --about 83.90% of the portfolio --while Financials and Telecom round out the top three.
When you look at individual holdings, Squarespace Inc - Class A (SQSP) accounts for about 2.07% of the fund's total assets, followed by Momentive Global Inc (MNTV) and Asana Inc - Cl A (ASAN).
The top 10 holdings account for about 17.79% of total assets under management.
Performance and Risk
Year-to-date, the WisdomTree Cloud Computing ETF has added roughly 11.64% so far, and is down about -5.21% over the last 12 months (as of 05/18/2023). WCLD has traded between $22.93 and $34.42 in this past 52-week period.
WCLD has a beta of 1.08 and standard deviation of 42.74% for the trailing three-year period. With about 70 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 $527.43 million in assets, First Trust Cloud Computing ETF has $2.56 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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Get it free >>WisdomTree Cloud Computing ETF (WCLD): ETF Research Reports
First Trust Cloud Computing ETF (SKYY): ETF Research Reports
Global X Cloud Computing ETF (CLOU): ETF Research Reports
Asana, Inc. (ASAN) : Free Stock Analysis Report
Squarespace, Inc. (SQSP) : Free Stock Analysis Report
Momentive Global Inc. (MNTV) : Free Stock Analysis Report
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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.
