Cloud Technology Monthly Report | August

• Global Cloud spending hit a record high in the 2nd quarter – $34.6bn up 11% over prior quarter, and 30% over same 2019 period [1].
• COVID-19 lockdown is pushing more remote Cloud adoption rates and usage than ever seen before.
• Cloud Infrastructure services led by AWS (Amazon) and Microsoft’s Azure, shows dramatic growth at expense of onsite data centres. 
• IDC estimate more than two thirds of global organizations across every industry now use Cloud based systems [2]. 
• Highest adoption rates in manufacturing, healthcare and financial services

Performance Review

Cloud Technology ETF HAN-GINS Cloud Technology ETF (SKYY) has continued to benefit from the remote working behaviours ushered in by the COVID-19 lockdowns globally.  In July it posted a gain of 4.73%, following a June return of 4.2%. For 2020, SKYY is up 13.61%. Its NAV hit a new all-time high of $10.74 in early August*.

Over the past 3 months, our cloud computing ETF has gained 16.48%, with a one year return of 25.44%.  It has rebounded well from its March lows – cancelling out all losses suffered earlier in the year.

SKYY continues to be a major beneficiary of the global Work From Home phenomenon.  A surge in demand from the public sector (governments) and healthcare operators has boosted cloud revenues and adoption rates.  The future has arrived much sooner for Cloud than many expected.

*Source: HANetf, Bloomberg. Data as of 19.08.2020

Source: Bloomberg/HANetf *YTD figures based on 01.01.20 - 31.07.20 **12 Month figures based on 01.08.19 -31.07.20

For the year to date 2020 leading performers in our portfolio include:

NVIDIA (80.6%), Amazon (71.3%), Kingsoft (98.0%) and Inseego (83.9%) (Source: FactSet/Solactive and Bloomberg Data as of 31/07/20)

The month of July saw a number of our largest holdings hitting new highs for 2020.  This includes Apple, Amazon, Alibaba, Splunk and NVIDIA.  See table on page four for full breakdown.

It is clear COVID has significantly fast-tracked adoption rates. The future of tech has already arrived with the lockdowns. We see Cloud now embedded in mainstream work-life activities. The flexibility of scaling up services, such as the Disney+ successful new online streaming service and flexible subscription model, will ensure this shift accelerates further, away from onsite hardware.  Less well known is the large adoption by governments/public sector of various Cloud services. This included a huge shift by large public health providers and hospitals.

Globally, we expect Cloud adoption rates to mirror the US – boosting Cloud spending across Europe and Asia in particular.  Cloud is increasingly becoming a utility type service – charging flexible monthly subscription fees. This pay-for-use model will encourage even more enterprises to make the switch away from expensive onsite data centres, which risk becoming increasingly obsolete.

HAN-GINS Cloud Technology UCITS ETF (SKYY) – 1 Year Performance (01/08/19 – 31.07.20)

Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Source: Bloomberg Data as of 31.07.2020

Industry News

According to UBS, the global cloud infrastructure market is expected to grow at 25% annualized (CAGR) from 2019–2023 [3].

Companies globally spent $34.6bn on Cloud services in the 2nd quarter - up 11% from the prior quarter and 30% above the same period in 2019 [4]. 

Asian IT firms, such as Alibaba and Samsung, are enjoying record earnings and accompanying stock gains. We expect this to accelerate too as global Cloud infrastructure has reached a tipping point, allowing most developing countries to enjoy the same benefits as the US.  Alibaba, a 4.2% holding, has gained over 30% in just the past 3 months [5].

IDG’s 2020 Cloud Survey of 550 IT decision makers shows enterprises plan to invest 32% of their total IT budgets on cloud infrastructure and applications next year. The survey indicates companies will spend an average of $74mn on cloud computing, a huge 59% gain over 2018 levels. It is clear the inhouse data centers are no longer the center of gravity for hosting enterprise applications. The public cloud is benefiting from massive migration of applications such as websites (53%), collaboration solutions (52%), storage and backup (42%), and business services (41%) such as CRM and ERP [6].

Applications & Services Being Migrated to the Cloud 

For illustrative purposes only

Source: IDG 2020 Cloud Survey

We expect cloud spending globally to gain momentum, given the new Work From Home behaviours, which we see as lasting.  Cloud now drives the Internet of Things as well as elements of Healthcare Innovation such as telemedicine – plus Future Cars, Cyber Security and Social Media.  These themes are increasingly dependent on Cloud.

Constituent News

Below we highlight some of the best performing cloud computing ETF holdings in SKYY’s portfolio.  Included are the stock’s individual price gains, as well as its contribution to SKYY’s portfolio return. The recent addition of Twilio has been a top performer and contributor to our July return. This broader definition of cloud includes all cloud communications, ensuring SKYY is one of the broadest cloud offers across all 3 key cloud areas of Infrastructure, Platform/Software as a Service.

Source: Bloomberg, HANetf. Data as of 31.07.20

Cloud Tech giants Amazon, Microsoft and Apple all touched new highs during July, continuing into early August.  Apple is now approaching a $2 trillion valuation.  Amazon and Microsoft also exceed $1 trillion market caps.  Microsoft’s commercial cloud revenue topped $50 billion for the year for the first time [7].  

Below we show the leading contributors to SKYY’s July performance – led by Twilio, Amazon, Apple, Alibaba and NVIDIA.  Amongst the most impressive returns for July were some of our smaller holdings too including:  Sierra Wireless up 48.6%  

Top Performing Contributors – YTD 2020 (01.01.20 – 31.07.20)

Past performance is no guarantee of future performance

Source: FactSet/Solactive and Bloomberg Data as of 31/07/20

Fund Details

HAN-GINS Cloud Technology UCITS ETF, is a UCITS compliant cloud computing ETF domiciled in Ireland.  

The SKYY cloud ETF tracks the Solactive Cloud Technology Index and seeks to provide exposure to companies active in the field of cloud computing, such as service providers or producers of equipment or software focused on cloud computing.  

Please remember that the value of your investment may go down as well as up and past performance is no indication of future performance.

• SKYY Factsheet
• SKYY Video
• SKYY Whitepaper
• SKYY Fund Page

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