Global X has introduced the fourteenth fund within its thematic investing suite with the launch of the Global X Cloud Computing ETF (CLOU US).
Listed on Nasdaq Exchange, the fund provides exposure to firms that stand to benefit from the proliferation of cloud technology and services.
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 computing industry was estimated to be worth $188 billion in 2018 and is expected to grow by 15% per annum to over $300 billion by 2022, according to Global X.
Michael Hoffmann, Research Analyst at Global X, commented, “With cloud computing, we’re witnessing a wide-ranging disruption of traditional IT infrastructure. The substantial increases in efficiency and power accessible through cloud-based technology is the backbone for enterprise IT, social media, and streaming platforms, and should continue to support the development of the most exciting technologies of our time like artificial intelligence and the Internet of Things.
“We’re thrilled to offer investors and clients a tool like CLOU to access this theme, and we’re excited to continue to watch this space evolve.”
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 will only include firms that derive at least 50% of their revenue from the above sub-themes. These 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”.
“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%.
The index, which is reconstituted and rebalanced on a semi-annual basis, currently contains 36 constituents and is largely tilted to stocks from the US which account for 88.5% of the total weight.
Global X will be hoping the fund replicates the success of the First Trust Cloud Computing ETF (SKYY US), the largest ETF covering the cloud computing space, which has grown its assets under management to over $2.2bn. The fund 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 is slightly cheaper than the Global X ETF with an expense ratio of 0.60%.