WisdomTree has launched a cloud computing ETF on the London stock exchange to track US-listed businesses which make most of their income selling business software services through the cloud.
The ETF will track the price and yield performance of the BVP Nasdaq Emerging Cloud Index, an index developed by Nasdaq and Bessemer Venture Partners.
The index will invest in firms on indices outside of the Nasdaq. The ETF, which has an expense ratio of 0.40, will invest in emerging public companies listed on the Nasdaq Stock Market, the New York Stock Exchange, NYSE American or the CBOE Exchange, tracking firms which are primarily involved in providing cloud software and services to their customers.
WisdomTree says it is seeking to target cloud computing businesses which it believes are best positioned for high levels of recurring revenue growth and have the potential to scale at a faster rate than traditional tech companies.
Jeremy Schwartz, WisdomTree global head of research, says: “Cloud-based businesses typically have better profit margins and higher growth than other tech companies.
“As the world becomes increasingly more digital and connected, the global cloud computing market has grown exponentially and is projected to total nearly $697 billion by 2025.
Dave Gedeon, head of index research & development, Nasdaq Global Indexes says: “Nasdaq and Bessemer Venture Partners have worked to bring a new benchmark to market, as cloud services gain in importance as tools of business growth.
“The BVP Nasdaq Emerging Cloud Index (EMCLOUD) is a tangible way to track the growth of companies that change their industries and empower their clients through use of cloud technology.”
The firm says that in order to be considered a cloud computing business and eligible for inclusion, the company must possess the following characteristics, as determined by BVP.
- Cloud Computing Focused: Each company must derive a majority of its revenue from business-oriented software products through a cloud delivery model that is a subscription based, volume-based, or transaction-based offering.
- Attractive Revenue Growth: New index constituents must have grown annual revenue by at least 15% for each of the last two full fiscal years; existing index constituents must have grown revenue by at least 7% in at least one of the last two fiscal years to remain eligible.
- Liquidity Constraints: Companies in the index must have a minimum market capitalization of $500 million and a minimum three-month average daily dollar trading volume of $5 million.