Launched on 05/27/2011, the First Trust Cloud Computing ETF (SKYY Quick QuoteSKYY - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Technology - Cloud Computing segment of the equity market.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Cloud Computing is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 5, placing it in top 31%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $3.05 billion, making it one of the larger ETFs attempting to match the performance of the Technology - Cloud Computing segment of the equity market. SKYY seeks to match the performance of the ISE Cloud Computing Index before fees and expenses.

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.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts 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.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector--about 86.50% of the portfolio. Telecom and Consumer Discretionary round out the top three.

Looking at individual holdings, Oracle Corporation (ORCL Quick QuoteORCL - Free Report) accounts for about 4.30% of total assets, followed by International Business Machines Corporation (IBM Quick QuoteIBM - Free Report) and Alphabet Inc. (class A) (GOOGL Quick QuoteGOOGL - Free Report) .

The top 10 holdings account for about 36.18% of total assets under management.

Performance and Risk

The ETF has added roughly 6.86% and is up about 44.70% so far this year and in the past one year (as of 04/15/2024), respectively. SKYY has traded between $60.70 and $97.12 during this last 52-week period.

The ETF has a beta of 1.07 and standard deviation of 31.36% for the trailing three-year period, making it a medium risk choice in the space. With about 66 holdings, it effectively diversifies company-specific risk.

Alternatives

First Trust Cloud Computing ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, SKYY is a great option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Global X Cloud Computing ETF (CLOU Quick QuoteCLOU - Free Report) tracks INDXX GLOBAL CLOUD COMPUTING INDEX and the WisdomTree Cloud Computing ETF (WCLD Quick QuoteWCLD - Free Report) tracks BVP NASDAQ EMERGING CLOUD INDEX. Global X Cloud Computing ETF has $572.52 million in assets, WisdomTree Cloud Computing ETF has $605.26 million. CLOU has an expense ratio of 0.68% and WCLD charges 0.45%.

Bottom Line

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