Last month, BetaShares introduced the ASX’s first cloud computing ETF: CLDD. Here’s what you need to know about this hot new ETF.
What is the CLDD ETF?
The BetaShares Cloud Computing ETF (ASX: CLDD) is all about giving investors exposure to cloud computing businesses.
For companies to make it into this ETF’s portfolio, they must meet a minimum threshold for how much of their revenue is generated by cloud computing.
Businesses that generate more of their revenue from cloud computing services are given priority in the ETF’s portfolio.
So what businesses are inside the CLDD ETF?
I’m sure you’ll recognise some of the ETF’s top holdings, including:
- Dropbox
- Proofpoint
- Zscaler
- Twilio
- Workday
- Shopify
- Xero (ASX: XRO)
- Everbridge
- Netflix, and
- Paycom Software.
There are 36 positions in total, with smaller positions of stocks in the portfolio like Zoom, Microsoft, Amazon, Alibaba and Alphabet.
Many of the cloud businesses in this portfolio are among the best companies in the world in their respective industries.
Why is CLDD such a hot ETF?
Well, the idea of cloud computing itself is a pretty cool sector.
But this isn’t just about a theme that captures the imagination – the returns of these businesses have been strong over the long-term.
Whilst the ETF is new, the index that it tracks has been around for a while and has done stunningly well.
Over the past five years, the index has returned an average of 37.91% per annum. Looking at the last year, the net return of the index has been 40.25%. Past performance is definitely no guarantee of future performance in this case. But even if the future returns are half of those past performance figures, it’d still be a really good return.
The ETF has an annual management fee of 0.67% per annum.
My take
I think the CLDD ETF has a very promising future with how much of the world is still yet to change to cloud computing from their current computing infrastructure.
This certainly isn’t a dividend ETF and it’s likely to be a higher risk and more volatile ETF than many others. But I think it’s an interesting idea.
There are long-term structural tailwinds here that could carry the ETF higher for a number of years to come, barring any interest rate rising effects.
