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?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by First Trust Advisors, and has been able to amass over $2.48 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.60%, making 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
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 84.6% of the portfolio. Telecom and Consumer Discretionary round out the top three.
When you look at individual holdings, Nutanix, Inc. (class A) (NTNX) accounts for about 3.94% of the fund's total assets, followed by Arista Networks, Inc. (ANET) and Mongodb, Inc. (MDB).
The top 10 holdings account for about 35.79% of total assets under management.
Performance and Risk
The ETF has lost about -13.08% and is down about -12.63% so far this year and in the past one year (as of 02/12/2026), respectively. SKYY has traded between $89.46 and $143.46 during this last 52-week period.
The ETF has a beta of 1.21 and standard deviation of 25.19% for the trailing three-year period, making it a medium risk choice in the space. With about 65 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 $207.66 million in assets, WisdomTree Cloud Computing ETF has $230.93 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
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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First Trust Cloud Computing ETF (SKYY): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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