Should You Invest in the First Trust Cloud Computing ETF (SKYY)?

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

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

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 8, placing it in top 50%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $3.07 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

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, 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 84.40% of the portfolio. Telecom and Consumer Discretionary round out the top three.

Looking at individual holdings, International Business Machines Corporation (IBM) accounts for about 4.37% of total assets, followed by Microsoft Corporation (MSFT) and Nutanix, Inc. (class A) (NTNX).

The top 10 holdings account for about 38.50% of total assets under management.

Performance and Risk

So far this year, SKYY has lost about -12.99%, and is up roughly 11.46% in the last one year (as of 04/29/2025). During this past 52-week period, the fund has traded between $86.45 and $131.18.

The ETF has a beta of 1.23 and standard deviation of 31.59% for the trailing three-year period, making it a medium risk choice in the space. With about 62 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 an outstanding 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) 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 $325.18 million in assets, WisdomTree Cloud Computing ETF has $374.64 million. CLOU has an expense ratio of 0.68% and WCLD charges 0.45%.

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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This article originally published on Zacks Investment Research (zacks.com).

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