Now home to more than $462 million in assets under management, the Global X Cloud Computing ETF (CLOU) is undeniably one of 2019’s most successful new ETFs, but more important than CLOU’s rookie year success is its potential to be durable over the long run.
CLOU, which debuted in April, follows the Indxx Global Cloud Computing Index, the fund holds a basket of companies that potentially stand to benefit from the continuing proliferation of cloud computing technology and services. The cloud computing industry refers to companies that (i) license and deliver software over the internet on a subscription basis (SaaS), (ii) provide a platform for creating software applications which are delivered over the internet (PaaS), (iii) provide virtualized computing infrastructure over the internet (IaaS), (iv) own and manage facilities customers use to store data and servers, including data center Real Estate Investment Trusts (REITs), and/or (v) manufacture or distribution infrastructure and/or hardware components used in cloud and edge computing activities.
Important to the CLOU thesis is the intersection of cloud computing and the booming cybersecurity industry.
“We expect spending in the cybersecurity market to remain elevated as regulations severely ratchet up data breach fines and malicious actors attempt to benefit from the latest networking trends to expose entities with outdated security postures,” said Morningstar in a recent note. “We think the $100 billion-plus cybersecurity market will expand at a five-year compound annual growth rate of 9%, and we expect certain areas, such as security for cloud-based workloads and applications, alongside automation solutions, to outpace more-traditional offerings.”
The increasingly digital and connected world that form the backdrop for CLOU’s launch is exhibiting significant growth and is expected to continue to grow over the coming years. The cloud computing industry that was estimated to be worth $188 billion in 2018 is expected to be worth over $300 billion by 2022, a nearly 15% annualized growth rate.
“The amalgamation of on-premises and cloud-based resources into hybrid-cloud networks, plus software-as-a-service applications and mobile users being ubiquitously connected, forever changed the security perimeter,” according to Morningstar. “This has spurred new ways to develop threats, including cybercrime as a service. In turn, new opportunities have developed for on-premises security vendors to proliferate their offerings outward and the creation of born-in-the-cloud security vendors.”
“In our view, Zscaler will remain a mainstay in cloud security and is evolving its portfolio to contend with established players attacking its beachhead,” said Morningstar. “Zscaler was created for the rise in enterprises adopting cloud-based resources and shifting spending from on-premises protection to include cloud-delivered protection.”
This article originally appeared on ETF Trends.