Making its debut on 09/06/2019, WisdomTree Cloud Computing ETF (WCLD) offers investors broad exposure to the market’s Technology ETFs category.
What are Smart Beta ETFs?
Products based on capitalization weighted indices, 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 indices provide an inexpensive, convenient, and transparent way to replicate market returns, they work well for investors who believe in market efficiency.
However, there are some investors who think it is possible to beat the market with great stock selection; this group is likely to invest in another category of funds known as smart beta, which follow non-capitalization strategies.
By trying to pick stocks that have a better chance of risk-return performance, non-cap weighted indices are based on certain fundamental characteristics, or a combination of these.
While this space offers investors a number of choices, including the simplest equal weighting, fundamental weighting and volatility/momentum weighting methods, not all of these strategies have been able to deliver superior results.
Fund sponsor & Index
WCLD is managed by Wisdomtree and this fund has raised more than $685.13 million, making it one of the larger ETFs in the Technology ETFs. This particular fund, before fees and charges, aims 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 providing cloud-based software to customers.
Costs and other costs
When considering the total return of an ETF, expense ratios are an important factor. And cheaper funds can significantly outperform their more expensive cousins in the long run, all other factors being equal.
The annual operating cost for WCLD is 0.45%, making it one of the less expensive products in the space.
The dividend yield over 12 months is 0%.
Industry exposure and top positions
While ETFs provide diversified exposure, minimizing the risk of individual stocks, taking an in-depth look at a fund’s holdings is a valuable exercise. And most ETFs are highly transparent products that disclose their positions on a daily basis.
For WCLD, it has the heaviest allocation in the information technology sector – about 91.40% of the portfolio.
Taking into account individual holdings, Tenable Holdings Inc (TENB) accounts for approximately 1.64% of the fund’s total assets, followed by Sprout Social Inc – Class A (SPT) and Agora Inc-Adr (API).
The top 10 WCLDs account for approximately 15.54% of total assets under management.
Performance and risk
The ETF has lost about -40.64% so far this year and is down about -45.98% in the past year (as of 07/06/2022). Over the past 52 weeks, it has traded between $25.93 and $65.33.
The fund has a beta of 1.24 and a standard deviation of 41.25% for the next three years. With approximately 76 holdings, it effectively diversifies company-specific risk.
WisdomTree Cloud Computing ETF is an excellent option for investors looking to outpace the Technology ETFs market segment. There are other ETFs in the space that investors might want to consider as well.
Global X Cloud Computing ETF (CLOU) tracks the INDXX GLOBAL CLOUD COMPUTING INDEX and the First Trust Cloud Computing ETF (SKYY) tracks the ISE Cloud Computing Index. Global X Cloud Computing ETF has $688.23 million in assets, First Trust Cloud Computing ETF has $3.64 billion. CLOU has an expense ratio of 0.68% and SKYY charges 0.60%.
Investors looking for cheaper and less risky options should consider traditional market cap ETFs that aim to match the returns of Technology ETFs.
Visit the Zacks ETF Center to learn more about this product and other ETFs, find products that fit your investment goals, and read articles on the latest developments in the ETF investing universe.
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