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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
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
The fund is sponsored by Wisdomtree. It has amassed assets over $540.14 million, making it one of the larger ETFs in the Technology ETFs. This particular fund, 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With one of the cheaper products in the space, this ETF has annual operating expenses of 0.45%.
The fund 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.
Representing 85.40% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Industrials round out the top three.
When you look at individual holdings, Block Inc - A (SQ) accounts for about 1.91% of the fund's total assets, followed by Q2 Holdings Inc (QTWO) and Docusign Inc (DOCU).
The top 10 holdings account for about 17.94% of total assets under management.
Performance and Risk
The ETF has lost about -9.36% and it's up approximately 7.98% so far this year and in the past one year (as of 05/30/2024), respectively. WCLD has traded between $26.89 and $37.05 during this last 52-week period.
WCLD has a beta of 1.14 and standard deviation of 39.87% for the trailing three-year period. With about 68 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 $458.33 million in assets, First Trust Cloud Computing ETF has $3.04 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
Block, Inc. (SQ) : Free Stock Analysis Report
First Trust Cloud Computing ETF (SKYY): ETF Research Reports
Q2 Holdings, Inc. (QTWO) : Free Stock Analysis Report
DocuSign (DOCU) : Free Stock Analysis Report
Global X Cloud Computing ETF (CLOU): ETF Research Reports
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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.
