Analyst Report
The Global X Cloud Computing ETF invests in an index of companies that stand to benefit from the increased adoption of cloud-based computing, including firms that provide cloud-based software, platforms and infrastructure.
Part of the Global X suite of niche thematic ETFs, the index methodology attempts to keep giants like Microsoft and Amazon from swamping the portfolio. To gain entry into the benchmark, companies must get at least half their revenue from these businesses. There’s an exception for firms that earn more than $500 million from cloud computing, but those stocks are limited to a combined 10 percent of the portfolio. CLOU’s top holdings include Zscaler, Akamai and Netflix.
At 68 basis points, the CLOU management fee is high for passive funds, but niche products aren’t designed to be core portfolio products for set-it-and-forget-it investors. Micro-sector funds are geared for medium-term tactical wagers of weeks or months.
There are plenty of cheaper technology ETFs for buy-and-hold investors looking for broad exposure to tech, such as State Street’s popular Technology Select Sector SPDR Fund (XLK) and the Vanguard Information Technology ETF (VGT). There are also funds devoted to a subset of tech, like the Invesco S&P SmallCap Information Technology ETF (PSCT) or the iShares Exponential Technologies ETF (XT), but none offer the same targeted exposure to cloud computing.
