Many new exchange traded funds struggle to attract assets immediately following their debuts. This is especially true of niche ETFs and those funds entering a market segment occupied by an established competitor.
What Happened
With those factors in mind, give the Global X Cloud Computing ETF CLOUS some credit. Just a few days shy of its one-month anniversary, CLOU has $103.46 million in assets under management, as of May 7, according to issuer data.
CLOU, which debuted on April 12, provides exposure to companies engaged in “Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), Infrastructure-as-a-Service (IaaS), managed server storage space and data center real estate investment trusts, and/or cloud and edge computing infrastructure and hardware,” according to New York-based Global X.
Why It's Important
Exceeding $100 million in assets is important for any new ETF because that is the asset level at which many industry observers believe issuers can make money on ETFs. Surpassing that milestone in less than a month is downright impressive.
In the case of CLOU, the new cloud ETF's immediate asset-gathering proficiency could be interpreted as a sign that the market can sustain multiple cloud computing ETFs. CLOU competes directly with the First Trust Cloud Computing ETF SKYY, which is nearly eight years old and has $2.25 billion in assets under management.
Obviously, CLOU has a way to go to catch SKYY, but the cloud computing market is growing at a rapid rate, indicating two ETFs can thrive in this niche.
“The global cloud computing market is estimated to be worth well-over $300 billion by 2022, up from about $188 billion today and growing at a compound annual growth rate (CAGR) of 14.6 percent,” according to Global X research.
What's Next
CLOU is off to a fast start despite charging 0.68 percent per year, or $68 on a $10,000 investment. That is eight basis points more than the rival SKYY charges.
The cloud ETFs aren't mirror images of each other. CLOU and SKYY have just seven overlapping holdings and the percentage of CLOU holdings also in SKYY is just 19.4 percent, according to ETF Research Center data. The overlap by weight between the two funds is just 17 percent, indicating CLOU has plenty of differences relative to its established rival that could lead to materially different returns over time.
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