The First Trust Cloud Computing ETF (SKYY) was launched on 05/27/2011, and is a smart beta exchange traded fund designed to offer broad exposure to the Technology ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
SKYY is managed by First Trust Advisors, and this fund has amassed over $3.47 billion, which makes it one of the larger ETFs in the Technology ETFs. Before fees and expenses, this particular fund 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.60%.
SKYY's 12-month trailing dividend yield is 0.00%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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 85.4% of the portfolio. Its Telecom and Consumer Discretionary round out the top three.
Taking into account individual holdings, Everpure, Inc. (class A) (P) accounts for about 5.1% of the fund's total assets, followed by Digitalocean Holdings, Inc. (DOCN) and Arista Networks, Inc. (ANET).
SKYY's top 10 holdings account for about 36.11% of its total assets under management.
Performance and Risk
The ETF has gained about 28.71% and is up about 18.97% so far this year and in the past one year (as of 10/30/2026), respectively. SKYY has traded between $104.16 and $174.89 during this last 52-week period.
The ETF has a beta of 1.27 and standard deviation of 27.20% 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 is a reasonable option for investors seeking to outperform the Technology ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
WisdomTree Cloud Computing ETF (WCLD) tracks BVP NASDAQ EMERGING CLOUD INDEX and the Global X Cloud Computing ETF (CLOU) tracks INDXX GLOBAL CLOUD COMPUTING INDEX. WisdomTree Cloud Computing ETF has $318.79 million in assets, Global X Cloud Computing ETF has $410.4 million. WCLD has an expense ratio of 0.45% and CLOU changes 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
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First Trust Cloud Computing ETF (SKYY): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).