Launched on 05/27/2011, the First Trust Cloud Computing ETF (SKYY) is a smart beta exchange traded fund offering broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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 $2.78 billion, which makes it one of the larger ETFs in the Technology ETFs. 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.
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 SKYY are 0.60%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.00%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
SKYY's heaviest allocation is in the Information Technology sector, which is about 85.6% of the portfolio. Its Telecom and Consumer Discretionary round out the top three.
Looking at individual holdings, Digitalocean Holdings, Inc. (DOCN) accounts for about 3.82% of total assets, followed by Nutanix, Inc. (class A) (NTNX) and International Business Machines Corporation (IBM).
SKYY's top 10 holdings account for about 36.08% of its total assets under management.
Performance and Risk
So far this year, SKYY has lost about -0.42%, and is up about 12.89% in the last one year (as of 06/23/2026). During this past 52-week period, the fund has traded between $104.16 and $155.17.
The ETF has a beta of 1.24 and standard deviation of 26.44% for the trailing three-year period, making it a medium risk choice in the space. With about 63 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.
Global X Cloud Computing ETF (CLOU) tracks INDXX GLOBAL CLOUD COMPUTING INDEX and the WisdomTree Cloud Computing ETF (WCLD) tracks BVP NASDAQ EMERGING CLOUD INDEX. Global X Cloud Computing ETF has $226.95 million in assets, WisdomTree Cloud Computing ETF has $241.23 million. CLOU has an expense ratio of 0.68% and WCLD changes 0.45%.
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
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First Trust Cloud Computing ETF (SKYY): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).