Packaging Cloud Computing as an Investment – First Cloud Computing ETF Launched
A technology can be considered to have truly “arrived”, become part of everyday life, when an investment vehicle is dedicated solely to it. Cloud computing now enjoys that privilege, with the launch of the first cloud computing ETF (Exchange Traded Fund) on NASDAQ last Wednesday. An ETF is an investment vehicle that holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day, usually tracking an index.
First Trust Advisors L.P., a privately owned Illinois-based investment manager with $51 billion under management, catering primarily to high net worth individuals, investments companies, charitable foundations and endowments, retirement systems, pension and profit sharing plans, insurance companies, municipalities, and corporations, launched the First Trust ISE Cloud Computing ETF on Wednesday. On this momentous occasion, Ryan Issakainen, senior vice president and ETF strategist at First Trust, rang the NASDAQ opening bell.
The fund is based on the ISE Cloud Computing Index, which was developed and is owned by International Securities Exchange (ISE). Kris Monaco, head of product development at ISE, said, “The ISE Cloud Computing Index reflects the evolution of technology infrastructure and provides new and dynamic opportunities for investors. We are very pleased to work again with First Trust on this unique exchange-traded fund focused on this rapidly expanding industry.”
Now, this is not the first time I have written about cloud computing from the investing point of view. In earlier articles, I have covered the excellent performance of cloud computing stocks (Breakout Quarter for Cloud Computing Stocks ) and also explored the possibility that they may be overvalued (Are Cloud Computing Stocks Overvalued?). However, stocks exist for all public companies as a consequence of the need to raise funds; the fact that a specific instrument has been created shows the demand for investing in the technology, the same way gold ETFs demonstrate investor interest in the yellow metal.
Justifying the launch, Issakainen said, “Cloud computing is projected to be one of the fastest-growing IT markets this year, according to IDC Research. As businesses and consumers continue to migrate to a cloud environment, we believe there are significant growth opportunities for the companies involved in all aspects of cloud computing. Forrester Research is projecting total public cloud revenues to go up 27% annually to reach nearly $160 billion by 2020, up from $15 billion in 2010.”
Now, these figures seem to be the most optimistic I have come across. I had earlier referred to an industry report that predicted businesses in the United States will spend more than $13 billion on cloud computing and managed hosting services by 2014 as compared to $3 billion now ( Where Is Cloud Computing Going? Up, Up And Away! ). If Forrester Research is right, cloud computing will continue to grow rapidly for several years more.
Only time can tell where cloud computing will stand 10 years, even 5 years from now. However, one thing is clear – it’s definitely here to stay. And grow…
By Sourya Biswas