ETF Managers Group (ETFMG) has introduced a new thematic ETF in the US providing exposure to companies listed globally that are at the forefront of cloud technology.
Daniel Ives, Managing Director and Senior Equity Analyst at Wedbush Securities.
The Wedbush ETFMG Global Cloud Technology ETF (IVES US) has been launched in partnership with financial services and investment banking firm Wedbush Securities.
The fund is available to trade on NYSE Arca and comes with an expense ratio of 0.68% and seed capital of approximately $25 million.
It has been created by repurposing the ETFMG Drone Economy Strategy ETF (IFLY US), which had struggled to generate any meaningful level of assets under management.
Methodology
The fund is linked to the Dan Ives Global Cloud Technology Prime Index which has been developed by ETFMG’s indexing division Prime Indexes in collaboration with Daniel Ives, Managing Director and Senior Equity Analyst at Wedbush Securities.
Daniel Ives has over 20 years of experience on Wall Street as a software and technology analyst with a focus on cloud computing, cybersecurity, big data, and the mobile landscape.
The index consists of companies listed globally that are either providers of cloud infrastructure (including equipment, connectivity, data back-up and storage services, and data center management) or providers of cloud-based software platforms that enable businesses to move data onto the cloud (i.e. cloud ‘enablers’).
Companies that are simply engaged in distributing software or services via the cloud, rather than enabling other companies to become cloud-based, are not included.
Prime Indexes will examine firm financial statements, public filings and reports, and third-party industry research in identifying suitable candidates. Companies must derive at least 50% of their revenue from relevant activities to be eligible for selection.
The index includes companies with market capitalizations between $200 million – $10 billion and average daily trading volumes greater than $1m.
According to Daniel Ives, by targeting small- to mid-cap cloud infrastructure players, the index focuses on companies driving the backbone of cloud computing – Wedbush research estimates these companies are expected to represent up to 70% of cloud spending over the next four years.
Constituents are weighted using a proprietary combination of market cap and liquidity. The index is reconstituted and rebalanced quarterly and employs buffers to limit unnecessary turnover.
“Bringing this next-generation cloud ETF to market collaboratively with the team at Wedbush and ETFMG is an initiative I am extremely excited about with cloud computing poised to see a major acceleration of enterprise spending over the next decade,” said Daniel Ives. “Our vision behind the ETF stems from an investor demand for direct, true global exposure to the ‘cloud enabler’ companies I have been covering for decades. In the next two years alone, we anticipate over a 65% increase in workloads managed in the cloud.”
Sam Masucci, Founder and CEO of ETFMG, added, “We are extremely proud to bring this unique thematic ETF to market alongside Wedbush and cloud technology expert, Daniel Ives. IVES answers a void in the investible cloud universe, giving investors exposure to the companies that are the foundation of the entire cloud ecosystem. This ETF is the first product of the powerhouse collaboration between our two firms, and together we look forward to continuing to drive what’s next in global investing.”
Comparable Funds
Cloud computing is a hot topic within thematic investing with three US-listed cloud ETFs already in existence, offered by First Trust, Global X, and WisdomTree.
The $2.1 billion First Trust Cloud Computing ETF (SKYY US) is the oldest and largest of the three. The fund launched in 2011 and tracks the ISE Cloud Computing Index which includes a mix of pure-play, non-pure-play, and technology conglomerate cloud computing companies listed in the US. It comes with an expense ratio of 0.60%.
The Global X Cloud Computing ETF (CLOU US) tracks the Indxx Global Cloud Computing Index which includes constituents from both developed and emerging markets, excluding India. It covers infrastructure and software providers as well as real estate investment trusts (REITs) involved in owning and managing data centers related to cloud computing. The fund has AUM of $400m and matches the price of ETFMG’s ETF with an expense ratio of 0.68%.
The most recent of the three funds is the WisdomTree Cloud Computing Fund (WCLD US) which is linked to the BVP Nasdaq Emerging Cloud Index. The index covers US-listed firms and American Depository Receipts of cloud computing companies and includes a growth-tilt by selecting firms that have grown their revenues by at least 15% in each of the past two fiscal years. The fund houses just $40m in AUM but is the cheapest with an expense ratio of 0.45%.