Designed to provide broad exposure to the Technology ETFs category of the market, the WisdomTree Cloud Computing ETF (WCLD) is a smart beta exchange traded fund launched on 09/06/2019.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; These funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by Wisdomtree. WCLD has been able to amass assets over $701.89 million, making it one of the average sized ETFs in the Technology ETFs. Before fees and expenses, this particular fund 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
Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.45% for this ETF, which makes it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 0%.
Sector Exposure and Top Holdings
It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has the heaviest allocation in the Information Technology sector – about 91.60% of the portfolio.
Looking at individual holdings, Tenable Holdings Inc (TENB) accounts for followed about 1.64% of total assets, by Sprout Social Inc – Class A (SPT) and Agora Inc-Adr (API).
Its top 10 holdings account for approximately 15.54% of WCLD’s total assets under management.
Performance and Risk
So far this year, WCLD has lost about -35.61%, and is down about -30.59% in the last one year (as of 05/06/2022). During this past 52-week period, the fund has traded between $33.03 and $65.33.
The fund has a beta of 1.26 and standard deviation of 38.96% for the trailing three-year period. With about 76 holdings, it effectively diversifies company-specific risk.
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 $770.40 million in assets, First Trust Cloud Computing ETF has $4.09 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.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
WisdomTree Cloud Computing ETF (WCLD): ETF Research Reports
Agora, Inc. Sponsored ADR (API): Free Stock Analysis Report
First Trust Cloud Computing ETF (SKYY): ETF Research Reports
Tenable Holdings, Inc. (TENB): Free Stock Analysis Report
Global X Cloud Computing ETF (CLOU): ETF Research Reports
Sprout Social, Inc. (SPT): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research