New exchange traded funds face plenty of headwinds on the road to success. That is even more true for funds entering an arena with established competitors or those looking to address an investment niche that has already been addressed by rival funds.
The Global X’s Cloud Computing ETF (NASDAQ: CLOU) is a targeted ETF that, when it debuted in April, wasn’t the first cloud computing ETF on the market. CLOU entered a competition long monopolized by First Trust ISE Cloud Computing Index Fund (NasdaqGM: SKYY). Yet, CLOU is easily one of 2019’s most successful new ETFs. The Global X fund already has nearly $507 million in assets under management.
“The Global X Cloud Computing ETF (CLOU) seeks to invest in companies positioned to benefit from the increased adoption of cloud computing technology, including companies whose principal business is in offering computing 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 the issuer.
Cloud computing is a fast-growing segment of the broader technology and software categories.
“Cloud computing is a fast-growing part of the technology industry,” reports Simon Constable for the Wall Street Journal. “It refers to the use of remote data-storage and data-processing services accessed through the internet. For instance, Google’s Gmail accounts use the cloud, and Amazon.com Inc. offers internet access to various software.”
CLOU ETF’s Fast Start is Remarkable
Most investors are familiar with the cloud, as it is likely the enigmatic space they turn to when it comes time to store photos, music, and other keepsakes when it is either inconvenient or space is limited to store such items on a physical hard drive.
While definitions for the cloud can seem a bit nebulous, it’s basically a term used to describe a global network of servers, each with a unique function.
CLOU’s fast start is remarkable for another reason. Typically, when a new ETF enters a crowded field, offering a lower fee than its competitors is seen as a recipe for success, but CLOU is slightly pricier than SKYY. CLOU charges 0.68% per year, or $68 on a $10,000 investment, while SKYY charges 0.60%.
“The Global X fund has succeeded despite coming to market years after the first cloud-computing ETF and charging more in fees than that pioneering fund. The $2.2 billion First Trust Cloud Computing ETF (SKYY), launched in 2011, has annual expenses of 0.60%, compared with 0.68% for the Global X fund,” according to the Journal.
For more thematic investing ideas, visit our Thematic Investing Channel.