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Is First Trust Cloud Computing ETF (SKYY) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust Cloud Computing ETF (SKYY - Free Report) debuted on 05/27/2011, and offers broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
SKYY is managed by First Trust Advisors, and this fund has amassed over $6.09 billion, which makes it one of the largest ETFs in the Technology ETFs. Before fees and expenses, SKYY seeks to match the performance of the ISE Cloud Computing Index.
The ISE Cloud Computing Index is a modified market capitalization weighted index designed to track the performance of companies actively involved in the cloud computing industry.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.17%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
SKYY's heaviest allocation is in the Information Technology sector, which is about 83.90% of the portfolio. Its Telecom and Consumer Discretionary round out the top three.
Looking at individual holdings, Digitalocean Holdings, Inc. (DOCN - Free Report) accounts for about 5% of total assets, followed by Oracle Corporation (ORCL - Free Report) and Mongodb, Inc. (MDB - Free Report) .
The top 10 holdings account for about 36.18% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Cloud Computing ETF has added about 10.39% so far, and is up about 7.62% over the last 12 months (as of 12/20/2021). SKYY has traded between $92.24 and $119.56 in this past 52-week period.
The ETF has a beta of 0.99 and standard deviation of 26.70% for the trailing three-year period, making it a medium risk choice in the space. With about 67 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Cloud Computing ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
WisdomTree Cloud Computing ETF (WCLD - Free Report) tracks BVP NASDAQ EMERGING CLOUD INDEX and the Global X Cloud Computing ETF (CLOU - Free Report) tracks INDXX GLOBAL CLOUD COMPUTING INDEX. WisdomTree Cloud Computing ETF has $1.17 billion in assets, Global X Cloud Computing ETF has $1.23 billion. WCLD has an expense ratio of 0.45% and CLOU charges 0.68%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Is First Trust Cloud Computing ETF (SKYY) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust Cloud Computing ETF (SKYY - Free Report) debuted on 05/27/2011, and offers broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
SKYY is managed by First Trust Advisors, and this fund has amassed over $6.09 billion, which makes it one of the largest ETFs in the Technology ETFs. Before fees and expenses, SKYY seeks to match the performance of the ISE Cloud Computing Index.
The ISE Cloud Computing Index is a modified market capitalization weighted index designed to track the performance of companies actively involved in the cloud computing industry.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.17%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
SKYY's heaviest allocation is in the Information Technology sector, which is about 83.90% of the portfolio. Its Telecom and Consumer Discretionary round out the top three.
Looking at individual holdings, Digitalocean Holdings, Inc. (DOCN - Free Report) accounts for about 5% of total assets, followed by Oracle Corporation (ORCL - Free Report) and Mongodb, Inc. (MDB - Free Report) .
The top 10 holdings account for about 36.18% of total assets under management.
Performance and Risk
Year-to-date, the First Trust Cloud Computing ETF has added about 10.39% so far, and is up about 7.62% over the last 12 months (as of 12/20/2021). SKYY has traded between $92.24 and $119.56 in this past 52-week period.
The ETF has a beta of 0.99 and standard deviation of 26.70% for the trailing three-year period, making it a medium risk choice in the space. With about 67 holdings, it effectively diversifies company-specific risk.
Alternatives
First Trust Cloud Computing ETF is an excellent option for investors seeking to outperform the Technology ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
WisdomTree Cloud Computing ETF (WCLD - Free Report) tracks BVP NASDAQ EMERGING CLOUD INDEX and the Global X Cloud Computing ETF (CLOU - Free Report) tracks INDXX GLOBAL CLOUD COMPUTING INDEX. WisdomTree Cloud Computing ETF has $1.17 billion in assets, Global X Cloud Computing ETF has $1.23 billion. WCLD has an expense ratio of 0.45% and CLOU charges 0.68%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Technology ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.