ETF Of The Week: Cloud Computing Rises

May 10, 2019

In one of the better debuts for a thematic fund, the Global X Cloud Computing ETF (CLOU) is already up to $108 million in assets under management, after less than a month of trading.

CLOU launched on April 12. Ever since, the ETF has steadily and organically attracted investor money (as opposed to a single day’s worth of seed capital pushing its net assets higher):


Source:; date range: April 12-May 9. 2019


CLOU's strong flows aren't a simple matter of investors suddenly pouring cash into cloud computing funds.

Over the same period, CLOU's main competitor, the $2.3 billion First Trust Cloud Computing ETF (SKYY) has taken in roughly half as much, at $51 million in net inflows. Meanwhile, a similar cloud computing ETF, the $2.7 million Tortoise Cloud Infrastructure ETF (TCLD), has attracted no additional net inflows beyond seed since its launch in January.

Nor are the flows attributable to investors seeking a cheaper option. Notably, CLOU is the most expensive of the three cloud computing ETFs: CLOU has an expense ratio of 0.68%, while SKYY costs 0.60% annually and TCLD costs 0.40%.

Clues To CLOU's Performance In Its Portfolio

Instead, the likely reason CLOU has overshadowed its competitors is due to its stronger performance out of the gate. Since inception, CLOU has risen 1.5%; SKYY, meanwhile, has fallen 0.10%, while TCLD has declined 1.93% over the same period:


Source: Bloomberg
Due to a discrepancy in timing, Bloomberg trading data for CLOU starts on 4/16, instead of 4/12.


The discrepancy in performance comes back to holdings. Despite ostensibly covering the same space, CLOU's portfolio is radically different from TCLD and SKYY's, due to the difference in how each fund defines and weights cloud computing stocks.

CLOU applies a broad, yet fairly common sense, definition of cloud computing, holding companies that generate 50% or more of their revenues from one of five business models; those that:

  • License and deliver software through online subscriptions, known as software as a service
  • Provide a platform for creating online software apps, known as platform as a service
  • Provide online, virtual computing infrastructure, known as infrastructure as a service
  • Own and manage data and server storage facilities, including data center REITs
  • Manufacture or distribute infrastructure and hardware components used in cloud and edge computing

Different Buckets Underneath

It's similar to the definition that TCLD uses, but differs from that of SKYY, which instead breaks eligible companies into three different buckets: pure plays, non-pure plays and technology conglomerates.

Although SKYY's index caps exposure to tech conglomerates at 10%, there's no such hard limit for nonpure-play companies. Instead, the weight SKYY's index allocates to nonpure-play stocks is calculated by dividing the total market cap of these companies by the sum of both pure and nonpure-play market caps.

As a result, a substantial portion of SKYY's portfolio is put toward companies for whom cloud computing isn't a primary business line, diluting its overall exposure to the theme and putting it more in line with a broad tech fund.

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