The WisdomTree Cloud Computing ETF (WCLD) is a passively managed exchange-traded fund (ETF) launched on September 6, 2019. Its purpose is to offer investors broad exposure to the exciting and rapidly growing Technology – Cloud Computing segment of the equity market. WCLD has gained significant traction among both retail and institutional investors who are increasingly drawn to passively managed ETFs for their distinct advantages: low costs, transparency, flexibility, and tax efficiency. These features make ETFs excellent vehicles for long-term investors seeking to participate in the growth of specific sectors.
Sector ETFs like WCLD offer convenience and a low-risk approach to gain diversified exposure to a wide range of companies within a particular sector. Technology – Cloud Computing is one of the 16 broad Zacks sectors within the Zacks Industry classification. Notably, this sector currently ranks 8th, placing it within the top 50% of all sectors.
Index Details and Performance
WCLD, sponsored by WisdomTree, has amassed over $399.90 million in assets, solidifying its position as a medium-sized ETF. Its primary goal is to mirror the performance of the BVP NASDAQ EMERGING CLOUD INDEX, an equally weighted index designed to measure the performance of emerging public companies specializing in delivering cloud-based software solutions to customers.
WCLD has faced some challenges in 2024. Year-to-date, it has lost about -11.13% and is down slightly by -0.06% over the past year (as of September 16, 2024). During this 52-week period, the fund has traded between $26.89 and $37.05. However, the ETF’s beta of 1.11 and a standard deviation of 39.89% for the trailing three-year period highlight its potential for volatility. Despite this, WCLD effectively diversifies company-specific risk with its approximately 68 holdings.
Cost and Expense Ratio
When investing in ETFs, it’s essential to pay attention to the expense ratio, as lower costs translate into better returns. WCLD’s annual operating expenses are 0.45%, which aligns with most peer products in the cloud computing ETF space. This low expense ratio further enhances the ETF’s attractiveness for long-term investors seeking to maximize their returns.
Sector Exposure and Top Holdings
While ETFs provide diversification, it’s still vital to understand their underlying holdings before investing. WCLD is transparent about its portfolio, disclosing its holdings daily. This ETF has a heavy allocation in the Information Technology sector, accounting for approximately 85.10% of its portfolio. Financials and Industrials make up the top three sectors.
Examining individual holdings reveals that Q2 Holdings Inc (QTWO) comprises about 2.82% of total assets, followed by Squarespace Inc – Class A (SQSP) and Wix.com Ltd (WIX). The top 10 holdings account for about 21.75% of total assets under management.
Risk and Alternatives
WCLD currently holds a Zacks ETF Rank of 1 (Strong Buy), which is based on factors such as expected asset class return, expense ratio, and momentum. This strong ranking makes WCLD an exceptional option for investors seeking exposure to the Technology ETFs segment of the market.
For investors looking at other cloud computing ETFs, two prominent alternatives are:
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Global X Cloud Computing ETF (CLOU):
Tracks the INDXX GLOBAL CLOUD COMPUTING INDEX with $353.11 million in assets and an expense ratio of 0.68%.*
First Trust Cloud Computing ETF (SKYY):
Tracks the ISE Cloud Computing Index with $2.90 billion in assets and an expense ratio of 0.60%.Conclusion
The WisdomTree Cloud Computing ETF (WCLD) offers investors a compelling way to gain diversified exposure to the dynamic and growth-oriented cloud computing sector. With its low costs, transparent holdings, and strong Zacks ETF Rank, WCLD stands out as a solid investment option for investors seeking to capitalize on the future of cloud technology. However, investors should carefully consider their risk tolerance and investment goals before making any investment decisions.
