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Cloud Technology Monthly Report | April

  • Cloud computing spending set to boom post-COVID – rising to $500bn within 2 years.        
  • Remote work habits continue to boost Cloud usage versus onsite hardware spending.        
  • Global public cloud infrastructure market will grow 35% to $120 billion in 2021.        
  • Multi and Hybrid Clouds are increasingly popular due to open architecture demand.        
  • Improved AI and 5G are facilitating the global expansion of Cloud adoption.

 

Cloud Technology ETF (SKYY) Returns

February

12 Month*

-0.71%

50.45%

Past performance is no guarantee of future performance. Source: Solactive, HANetf *12 Month figures based on 01.04.20 - 31.03.21.

 

Performance Review

HAN-GINS Cloud computing ETF (SKYY) offers broad exposure to all key areas of the Cloud revolution – infrastructure, security, platform and software – as a service.  SKYY includes large cap multinationals as well as mid-and small caps in its 50 holdings.  SKYY’s large-cap and infrastructure exposure ensures it accurately tracks global cloud activity well beyond just the US and software developers.

In March, the Cloud computing ETF's largest contributors to performance included CISCO (15.2% gain), IBM (12.1%), NetApp (16.1%), Fortinet (9.2%), HP (9.0%), Oracle (8.8%) and Dell (8.7%).  The pandemic and remote working phenomenon is boosting demand for these firms’ Cloud services.  They are amongst the largest weighted holdings in the portfolio.

Past performance is no guarantee of future performance. Source of all data: Solactive/ HANetf as of 31/03/2021

Big Tech giants are expanding their reach into the fast-growing Healthcare sector, as hospitals increasingly switch to Virtual services and Telemedicine. Microsoft’s $16bn acquisition of Nuance Communications reinforces this trend as Nuance is a leader in the field of digitizing doctor patient visit details/conversations and clinical documentation.

In 2021, big Cloud trends include moves to more hybrid/multi-cloud platforms and infrastructure.  This allows multinationals to speedily adopt cloud services across their various global units, allowing the easy flow of data across multiple Clouds.  IBM’s recent price gain is tied to its goal of becoming the largest hybrid cloud player, on the backs of its $35bn Red Hat acquisition.  

 

Holdings

% Average Weight

Total Return (%)

Contribution to Return (%)

CISCO SYSTEMS INC

4.31

15.24

0.63

INTL BUSINESS MACHINES CORP

4.05

12.05

0.46

ORACLE CORP

4.11

8.77

0.35

INTEL CORP

5.30

5.30

0.32

NETAPP INC

1.56

16.09

0.24

FORTINET INC

2.49

9.22

0.23

DELL TECHNOLOGIES -C

2.30

8.73

0.20

HEWLETT PACKARD ENTERPRISE

2.03

8.98

0.20

EQUINIX INC

3.64

4.82

0.16

F5 NETWORKS INC

1.25

9.81

0.12

ADOBE INC

3.57

3.42

0.10

VMWARE INC-CLASS A

1.19

8.86

0.10

CITRIX SYSTEMS INC

1.71

5.36

0.09

ALPHABET INC-CL A

4.66

2.01

0.08

Past performance is no guarantee of future performance. Source:  Solactive. Data as of 31.03.21

HAN-GINS Cloud Technology UCITS ETF

– Performance As of 31.03.21

 

1M

3M

6M

YTD

12M

SI

HAN-GINS Cloud Tech UCITS ETF

-0.71%

1.77%

10.37%

1.77%

50.45%

56.32%

Solactive Cloud Technology Index (NTR)

-0.66%

1.89%

10.65%

1.89%

51.27%

58.31%

Past performance for the index is in USD. 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 / HANetf. Data as of 31/03/2021

 

Industry News

Cloud spending is not expected to slow down as the pandemic gets under control.  Remote work habits are expected to continue and Cloud computing is arguably the centrepiece of the world’s technical response to the COVID-19 crisis.

According to IDC Research, public cloud spending will grow from US$229bn in 2019 to US$500bn in 2023, with a compound annual growth rate (CAGR) of 22.3%.

Increased usage of hybrid cloud services is expected as benefits include greater speed, control, and security. In terms of speed, it optimizes the network to reduce the latency and speeds up the data so that it can reach where it needs to be.

By the end of 2021, we expect 60% of companies will utilise public cloud platforms and 25% of developers will use serverless. Cloud native technology is driving enterprise digital transformation strategies.  Other key trends include:

Alibaba Cloud is expected to take over the No. 3 revenue spot globally, after Amazon Web Services (AWS) and Microsoft Azure.

The percentage of worldwide IT spending dedicated to the cloud will continue to accelerate in 2021. Gartner predicts that worldwide public cloud spending by end-users will grow 18% in 2021 to $304.9 bn, up from $257.5bn in 2020.

Cloud providers are also moving into promising emerging markets, such as Edge cloud and edge computing.

Big Tech players Microsoft, Google, and Amazon are increasingly collaborating with healthcare and pharma firms to develop drugs fast and cheaply, with the assistance of AI and Cloud Computing.   

 

Constituent News

The Cloud computing ETF currently has 50 constituents, with the US country weighting at 91.4%. It is followed by Asia (4.6%) and Europe (3.9%).  In April SKYY will be undergoing a broadening of its holdings as follows - with these upgrades.  SKYY will now be the most representative Cloud ETF mirroring the global revenue mix across the Cloud industry and its subthemes:

Highlights include: 

  • Holdings expanding to 75 from 50 (fast-growing players).        
  • Equally Weighted approach - capturing even more innovative Cloud companies.       
  • The above approach will ensure smaller companies have a larger weighting in our ETF, while ensuring  diversification is foremost too.  Each holding will average around 1.3%        
  • More representative of Cloud industry with SaaS holdings (Software as a Service) now the largest weighting at 66%, PaaS 20% and IaaS 14%.        
  • A new ESG screen will follow UN Global Compact rules (excludes controversial weapons, fossil fuels etc).        
  • US weightings will now fall to approximately 75% from over 90% currently.        
  • Cloud Tech spending is expected to reach $500bn within 2 years – double current levels.

For illustrative purposes only. Source:  Solactive Index, GinsGlobal Index Funds, April 2021

 

Outlook

SaaS (Software as a Service) will continue to dominate Cloud spending (see chart below).  Infrastructure-  and Platform as a Service areas together currently represent the remaining ~50% of Cloud computing revenues.  SaaS and IaaS are projected to see the fastest growth over the next few years, across the Cloud space.

The majority of IT corporate spend is moving away from onsite hardware and servers to remote Cloud usage.  Data centre chip revenues and Hyperscale Cloud have seen significant revenue boosts during COVID. The global cloud storage market is expected to grow from $50.1bn in 2020 to $137.3bn by 2025, at a Compound Annual Growth Rate (CAGR) of 22.3%. The need for agile storage solutions to manage the ever-increasing data volumes is driving this growth.

Hybrid Cloud’s growing popularity using open-source software such as Linux ensures many more businesses can now embrace the Cloud. Cloud services across public, private and edge environments are using the hybrid model via multiple cloud service providers. This ensures faster scaling up for business globally. The shift to hybrid cloud translates to a blurring of the lines between the public cloud and the traditional data centre. 

Artificial intelligence, analytics, security, IoT, and edge computing will likely be key differentiators among the top cloud service providers – along with serverless and managed services.

Cloud usage in Asia for online gaming and streaming has made this region the fastest growing area for digital entertainment. The Asia-Pacific Cloud Gaming market is estimated to see a CAGR of 46.8% during the forecast period 2016-2022. This is based on huge increases in mobile and internet subscriber bases, increases in the gaming audience and continued government infrastructure upgrades.

SaaS Revenues Larger Than Other Cloud Areas

 

For illustrative purposes only. Past performance is no guarantee of future performance. Source: https://globalxetfs.co.jp/en/research/cloud_new/

 

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