Cloud Technology Monthly Report | October

13 October 2020

  • Companies and remote workforces are benefiting from flexible cloud services and costs. 
  • On-premises hardware is losing rapid market share to Cloud infrastructure spending. 
  • Global Cloud adoption rates and spending continue to reach new records. 
  • SKYY, our Cloud Computing ETF, is expected to hit new highs in October as IT sector rebounds.

 

Performance Review

Monthly Performance of SKYY: Cloud Computing ETF

HAN-GINS Cloud Technology ETF (SKYY) offers broad Cloud exposure to all key areas.  Its performance is less volatile as a result. SKYY’s large-cap exposure ensures it accurately tracks global cloud activity, not just the US market.

Work From Home behaviours continues to drive cloud adoption rates.  Following a 7.9% gain in August, Cloud lost -2.82% in September as the market took a breather.  It remains up over 32% for the past year.  Its NAV hit $11.44 in early October – approaching a new high.[1]

IBM’s recent spinoff of its entire Cloud business into a new listed entity will also benefit SKYY due it its exposure to large Cloud Infrastructure players and global IT Megacaps leaders in this space (Google, Amazon, Oracle, Salesforce & Microsoft).  The COVID pandemic and Cloud Security concerns have powered our top performers for September, with Zoom Video up a record 44.6%, Bandwidth (10.9%), Crowdstrike (9.2%), Cloudflare (7.3%) and Oracle (4.3%). 

 

 

Cloud Technology ETF (SKYY) Performance


September


YTD
*


12 Month
**


-2.82%


19.18%


32.40%

Past performance is no guarantee of future performance.

Source: Bloomberg/HANetf *YTD figures based on 01.01.20 - 30.09.20 **12 Month figures based on 01.10.19 -30.09.20

 

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

NVIDIA (130.3%), Kingsoft (94.0%), Zoom Video (80.6%), Amazon (70.4%), Apple (58.8%), Salesforce (54.5%), Adobe (55.7%), Adobe (48.7%), Alibaba (38.6%) and Microsoft (34.4%).

We expect more M&A corporate activity in the Cloud space, particularly amongst Cloud Security firms.  The large Cloud Infrastructure players will be unable to make ground breaking deals due to the US Election and anti-trust concerns.  We expect smaller add-on acquisitions by the Megacap players whose record share prices provide them with a relatively low-cost, cheap currency.

Past performance is no guarantee of future performance. Source of constituent data: I FactSet/Solactive and Bloomberg Data as of 30/09/20 

Large scale Cloud adoption across the public sector (governments, schools, hospitals and NGOs) means growing revenues for the key players controlling Cloud pipelines.  Longer term, we see multi-cloud players becoming even more important as data is shared across various platforms.

The Top 10 holdings of our Cloud Computing ETF have shifted significantly – with Zoom Video now our largest holding at 6.46%, NVIDIA (5.08%), Salesforce (4.75%), Alibaba (4.72%) and Apple (4.52%).  This is partly due to September’s Big Tech falls, including Apple’s share price losing 10.3%, Google   down 10.1%, Salesforce down 7.8% and Amazon -8.8%. However, these Megacaps have been resilient at the beginning of October, recovering much of this lost ground. 

Due to COVID-19, Cloud Technology is increasingly embedded into mainstream work-life activities – from digital entertainment/streaming services to video conferencing, social media and remote learning.  While the US is the most built-out across Cloud, Europe and developing nations are where much of the future growth is expected.  Larger cloud players held by SKYY have a distinct advantage over smaller Cloud players given their existing global reach.

 

HAN-GINS Cloud Technology UCITS ETF - Performance

Total Return NAV to Date (up to 30/09/2020)

 

1M

3M

6M

YTD

12M

Since Inception

HAN-GINS Cloud Technology UCITS ETF (Acc)

-2.82%

9.86%

36.31%

19.18%

32.40%

41.63%

Solactive Cloud Technology Index (NTR)

-2.78%

10.01%

36.71%

19.69%

33.18%

43.08%

 

HAN-GINS Cloud Technology UCITS ETF (SKYY) - 1 Year Performance (01/10/19-30/09/2020)

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 30.09.2020

 

Industry News

IBM announced a massive spinoff of all their Cloud Computing initiatives into a soon to be listed new entity.  Their stock rose significantly as a result[2]. This new entity makes it easier for them to offer global cloud solutions beyond IBM’s customer base, particularly with other large Cloud/Tech players.  The rerating of IBM follows companies increasingly embracing a multi-cloud approach, moving away from a single provider. 

Between 2017-2023, the global Multi Cloud management market is estimated to grow at a CAGR of approximately 31%.[3] While IBM’s acquisition last year of Red Hat places it amongst these hybrid leaders, Amazon Web Services, Microsoft Azure, and Google Cloud are all vying for market share.  Dell Technologies, Hewlett-Packard and VMware are also key players.   

  • The global public cloud computing market is set to exceed $330 billion in 2020.
  • Providing data access from anywhere is the top reason for cloud adoption.
  • Organizations’ average yearly cloud budget was $2.2 million in 2018.
  • About a third of companies’ IT budget goes to cloud services.
  • Privacy, security and lack of staff training are the top roadblocks to cloud adoption.
  • Hybrid cloud adoption is at 58%.

Source https://hostingtribunal.com/blog/cloud-computing-statistics/#gref

Data acquisition remains vital – as the more corporate data that resides in a Cloud the more difficult it is for the customer to move.

 

 

Cloud Spending Trends

Public cloud spending hit a milestone when it has passed traditional IT infrastructure for the first time in the second quarter of 2020, according to IDC[4]. Spending on cloud environments, including public and private, increased 34.4% from a year ago[5].

Globally, Cloud is benefiting from major shifts to online tools; from virtual business events, entertainment, shopping, telemedicine, and education. Cloud based environments, particularly public cloud, are a key facilitator of this shift. Spending on public cloud IT infrastructure increased 47.8% year over year in 2Q20, hitting $14.1bn.[6] This exceeded the level of spend on non-cloud IT infrastructure for the first time ever.

The IT hardware infrastructure market has reached a tipping point, with the Cloud continuing to account for an increasingly higher share of overall market spending. Investments in cloud IT infrastructure is still expected to exceed spending on non-cloud infrastructure. Much of this growth will be driven by public cloud IT infrastructure spending.[7]

While spending on Cloud IT infrastructure has increased across all regions in 2Q20, the two largest regions, China and the U.S., have delivered the highest annual growth rates at 60.5% and 36.9% respectively. All regions, except Central & Eastern Europe and the Middle East & Africa, has witnessed the growth in public cloud infrastructure that is now exceeding private cloud IT spend.[8]

 

Constituent News

Below we highlight some of the best performing Cloud ETF holdings in SKYY’s portfolio.  Included are the stock’s individual price gains, as well as its contribution to SKYY’s portfolio return. Recent additions such as Zoom Video and Twilio haven been amongst our top performers and contributor to our recent returns. This broader Cloud definition, includes all cloud communications, ensuring SKYY is one of the most diversified cloud offering - across all 4 key cloud areas of Infrastructure, Platform and Software as a Service, plus Security.

 

Top 10 Constituents

Weight

Zoom Video

6.46%

NVIDIA Corp

5.08%

Salesforce

4.75%

Alibaba Group

4.72%

Apple Inc.

4.52%

SAP SE

4.09%

Amazon.com Inc

4.07%

Twilio Inc.

4.07%

Adobe Inc

4.00%

Oracle Corp

3.90%

 

Region Breakdown

Weight

North America

90.20%

Europe

4.09%

Asia

5.70%

Source: Bloomberg, HANetf. Data as of 30/09/2020

 

Below are the leading contributors to SKYY’s year to date and September performance leaders – led by NVIDIA, Kingsoft, Zoom Video and Amazon for the year to date.  September had a number of smaller firms contribute to performance as the large caps swooned.

 

Top Performing Contributors– Year to Date 2020 (01/01/2020 – 30/09/2020)

Name of Holding

Average Weight (%)

Total Return (%)

Contribution to Return (%)

NVIDIA CORP

4.92

130.33

4.63

KINGSOFT CORP LTD

0.48

94.03

0.30

ZOOM VIDEO COMMUNICATIONS-A

1.32

80.60

3.10

AMAZON.COM INC

4.63

70.40

3.06

APPLE INC

4.40

58.84

2.30

SALESFORCE.COM INC

4.25

54.53

1.92

ADOBE INC

4.29

48.70

1.89

PARETEUM CORP

0

43.17

0.02

INSEEGO CORP

0.24

40.79

0.12

ALIBABA GROUP HOLDING-SP ADR

4.11

38.60

1.52

CEVA INC

0.15

36.20

0.07

BANDWIDTH INC-CLASS A

0.11

35.96

0.13

MICROSOFT CORP

4.32

34.43

1.47

EQUINIX INC

4.39

31.75

1.29

DELL TECHNOLOGIES -C

1.74

31.72

0.62

AVAYA HOLDINGS CORP

0.06

31.49

0.06

21VIANET GROUP INC-ADR

0.01

31.03

0.06

CROWDSTRIKE HOLDINGS INC - A

0.66

29.29

0.64

ALARM.COM HOLDINGS INC

0.29

28.58

0.06

SPLUNK INC

3.68

25.61

0.95

CITRIX SYSTEMS INC

2.56

25.18

0.78

QUALYS INC

0.47

17.56

0.10

ZSCALER INC

0.37

17.33

0.22

SIERRA WIRELESS INC

0.19

16.43

0.04

SAP SE

3.79

14.67

0.50

ORACLE CORP

3.93

14.18

0.62

Past performance is no guarantee of future performance. Source: FactSet/Solactive and Bloomberg Data as of 30/09/20

 

Fund Details

HAN-GINSCloud Technology UCITS ETF, is a UCITS compliant 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.

EXCHANGE BB CODE RIC ISIN CURRENCY INCOME
London Stock Exchange SKYY LN SKYY.L IE00BDDRF924 USD Acc
London Stock Exchange SKYP LN SKYP.L IE00BDDRF924 GBP Acc
Borsa Italiana SKYY IM SKYY.MI IE00BDDRF924 EUR Acc
XETRA 5XYE GY 5XYE.DE DE000A2N5XC4 EUR Acc
SIX SKYYSW SKYY.S IE00BDDRF924 CHF Acc

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