BetaShares looks set to list Australia’s first ETF providing targeted exposure to cloud computing stocks.
Cloud computing is one of the fastest-growing segments of the global technology sector.
Scheduled to debut on 24 February, the BetaShares Cloud Computing ETF (CLDD AU) will trade on the Australian Securities Exchange and come with an expense ratio of 0.67%.
Cloud technology refers to shared pools of configurable computer system resources and higher-level services that can be rapidly provisioned with minimal management effort, often over the internet.
Through the delivery of computing services via the internet – from servers, storage, databases, networking, and software – cloud computing has helped fuel technological expansion by enhancing global accessibility and unveiling new ways to grow businesses.
The cloud industry has been one of the strongest-growing segments of the global technology sector in recent years, a trend that has accelerated during the Covid-19 pandemic.
According to global research firm Gartner, end-user spending on public cloud services worldwide is forecast to grow 18.4% this year to reach $304.9 billion, while cloud computing is projected to make up 14.2% of the total global enterprise IT spending market in 2024, up from 9.1% in 2020.
While recent growth has been impressive, the majority of the world’s digital data and software applications remain outside the cloud, further highlighting the potential for continued strong growth in the industry.
Methodology
The ETF obtains its exposure to the cloud computing theme by tracking the Indxx Global Cloud Computing Index. The index includes constituents from both developed and emerging markets, excluding India, that have market capitalizations above $200 million and average daily trading volume greater than $2m.
A firm is deemed to be linked to the cloud computing theme if its business operations involve the provision of software, platform, or infrastructure services related to cloud computing, or if the company designs and manufactures hardware used in cloud activities. The methodology also covers real estate investment trusts (REITs) involved in owning and managing data centers related to cloud computing.
The index first identifies companies that derive at least 50% of their revenue from the above activities. These pure-play firms are defined as “Cloud Computing Companies”. The 30 firms with the highest revenue percentage attributable to these business operations are selected while limiting the number of REITs to five.
The methodology also selects up to ten firms that earn over $500m in revenue specifically from the provision of public cloud infrastructure. The index defines these firms as “Public Cloud Companies” which generally consists of larger tech companies that are active in the cloud computing space.
“Cloud Computing Companies” are weighted by market cap subject to an individual cap of 4.0%. Additionally, the aggregate weight for REITs is capped at 10%. “Public Cloud Companies” are also weighted by market cap but are subject to an individual cap of 2% and an aggregate cap of 10%.
As of the end of January, the index, which is reconstituted and rebalanced on a semi-annual basis, contained 36 constituents and was largely tilted towards stocks from the US which accounted for 84.7% of the total weight. The information technology sector made up three-quarters (75.9%) of the index weight followed by communication services (11.8%).