New cloud computing ETF taps into fast-growing universe

Evolve ETFs has filed a preliminary prospectus with the Canadian securities regulators for the country's first cloud computing ETF.

The Evolve Cloud Computing Index Fund (DATA) is designed to provide investors with access to companies operating in an industry that has experienced rapid growth both pre-COVID-19 and during the pandemic.

Widespread work-from-home policies have increased the need for secure, reliable technology infrastructure and it’s a trend that is not expected to slow down once a vaccine is made available.

DATA seeks to replicate – to the extent reasonably possible and before fees and expenses – the performance of the Solactive Global Cloud Computing Index Canadian Dollar Hedged and invests primarily in equity securities of companies located domestically or internationally that have business operations in cloud computing.

The Solactive Global Cloud Computing Index measures the performance of equity securities of companies that are located in developed markets. The Index is published in Canadian dollars.

Evolve CEO Raj Lala told WP that while cloud computing is already an element within its Evolve Innovation Index Fund, the universe of companies is now big enough that it’s impossible to ignore and, therefore, deserves its own fund.

He explained: “When we look at disruptive technology, one of the foundations of our world today is data. Data has effectively become our most precious resource in the world; I would argue more precious than gold and oil. Companies have to store it somewhere and companies have to protect it. On the protection side, we've got that really well covered with our cyber security ETF, where we've had some great success with both performance and asset gathering.

“On the storage side, it's all going into the cloud. We think that there's a very large market – and it’s actually already two and a half times larger than the entire cybersecurity industry. Globally, right now, the cloud computing industry is about $500 billion and is expected to grow to a trillion dollars over the next few years.”

The global population has a reported 25 billion devices connected online around the world today – that’s three per person – whether it’s via your phone, thermostat or maybe even your fridge. And there is little doubt that remote working has resulted in a surge of demand for software.

Lala said: “DocuSign is a great example of software as a service infrastructure that we need during this type of environment. The amount of data that's been moving to the cloud since COVID kicked in has been pretty significant. For our business, there’s Salesforce, which is cloud-based software and Zoom, of course, which has become instrumental to our lives. Then think about Disney+, Netflix … that's cloud computing.

“What’s interesting is it’s become a foundation for a long-term behavioural shift, I believe. We’ve gotten used to this technology and even when we start to go back to our office, it's still now going to be integrated into our everyday life.”

Lala added that it's become such a large industry that it’s now impossible for investors to ignore.

“Pretty much everything you're doing in your daily life today includes cloud computing, and is utilizing the software as a service, platform, or infrastructure as a service. Everyone can appreciate how big of an industry that's become and I think that's one of the reasons it's become so investable.”