Technology exchange-traded funds continue evolving and with that evolution comes a compelling opportunity for investors with industry funds, including those emphasizing cloud computing and cybersecurity stocks.
What Happened: In fact, cloud computing and cybersecurity were two of the original frontiers for thematic tech ETFs with the first cybersecurity ETF launching nearly six years ago. The newest debuted Thursday: The WisdomTree Cybersecurity Fund WCBR.
The new ETF tracks the WisdomTree Team8 Cybersecurity Index, which includes 24 purveyors of cyber security-oriented products.
Compared to legacy cybersecurity benchmarks, the WisdomTree Team8 Cybersecurity Index is a fresh approach to this tech industry. The index is rooted in seven cybersecurity themes: Cloud security, security of things, perimeterless world, privacy and digital trust, resilience and recovery, shift-left and smarter security.
Why It's Important: WCBR could prove to be a well-timed launch as it comes to market following the SolarWinds hack and as cybersecurity spending is poised for rapid in the coming years.
“Security and privacy are at the epicenter of this complex and interconnected network of systems and devices. Individuals, enterprises and nations will need to invest to protect, defend and audit the integrity of these systems and the data that resides within them,” according to WisdomTree research.
WCBR's top holdings combine for 55.64% of the new ETF's roster. That group includes Palo Alto Networks PANW, Rapid7 RPD, Fastly FSLY, Crowdstrike CRWD and Okta OKTA.
“The two key tenets of our cybersecurity methodology are designed to increase exposure to companies that are exhibiting both: 1) fast revenue growth and 2) involvement in an array of cybersecurity development themes,” notes WisdomTree.
“Companies that are deriving 50% or more of their revenue from cybersecurity products and services are assigned a focus score, quantified by a company’s exposure across cyber themes defined by Team8, and a growth score, quantified by the revenue growth that a company exhibits.”
What's Next: WCBR enters an arena where its two established competitors have more than $3.7 billion in combined assets under management. However, WCBR has at least one advantage: It charges 0.45% per year or $45 on a $10,000 investment. That's 15 and five basis points less expensive than its entrenched rivals.
Plus, WisdomTree has been down this road before. Its WisdomTree Cloud Computing Fund WCLD is the newest of the three dedicated cloud ETFs and has $1.33 billion in assets under management. It was also the best-performing member of the trio last year.
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