Designed to provide broad exposure to technology – the cloud computing segment of the stock market, First Trust Cloud Computing ETF (The sky – Free Report) is a passively managed stock exchange fund launched on 05/27/2011.
Passive-traded ETFs are an increasingly popular choice among individual and institutional investors, offering low costs, transparency, flexibility, and tax efficiency; It is also an excellent vehicle for long-term investors.
Sector ETFs are also convenient funds, offering many ways to gain low risk and diversified exposure to a wide range of companies in particular sectors. Technology – Cloud computing is one of 16 Zacks broad sectors within the Zacks Industry Ranking. It currently ranks 9, which puts it at a low of 44%.
The fund is sponsored by First Trust Advisors. It has accumulated over $2.91 billion in assets, making it one of the largest ETFs trying to match the performance of the technology and cloud computing sector of the stock market. SKYY seeks to match the performance of the ISE Cloud Computing Index before fees and expenses.
The ISE Cloud Computing Index is a market value-weighted adjusted index designed to track the performance of companies actively participating in the cloud computing industry.
Expense ratios are an important factor in the return of ETFs, and in the long run, cheaper funds can greatly outperform their more expensive counterparts, other things being equal.
The ETF’s annual operating expense is 0.60%, which puts it on par with most similar products in the field.
It has a 12-month consecutive dividend yield of 1.31%.
Sector exposure and holdings
It is important to delve into an ETF property before investing though because the many benefits of these types of funds are such as diversified exposure, which reduces the risk of individual stocks. Most ETFs are very transparent products that reveal their holdings on a daily basis.
This fund has the largest allocation in the IT sector – about 85.60% of the portfolio. Discretionary contacts and consumers of the top three.
Looking at the individual holdings, Mongodb, Inc. (mdb – Free Report) accounting for about 4% of total assets, followed by Pure Storage, Inc. (Class A) (PSTG – Free Report) and Arista Networks, Inc. (Network – Free report).
The top 10 holdings account for about 34.21% of total assets under management.
performance and risk
Year-to-date, the First Trust Cloud Computing ETF has lost about -40.13% so far, and is down about -42.68% over the past 12 months (as of 11/24/2022). SKYY has been trading between $55.97 and $111.27 in the past 52-week period.
The ETF has a beta of 1.05 and a standard deviation of 34.69% for the subsequent three-year period, making it a mid-risk option in the space. With around 71 holdings, it effectively diversifies the risk profile of the company.
The First Trust Cloud Computing ETF has a Zacks ETF rating of 1 (Strong Buy), which is based on the expected return of the asset class, expense ratio, and momentum, among other factors. For this reason, SKYY is an excellent choice for investors seeking exposure to the technology ETF sector of the market. There are other additional ETFs in the space that investors can consider as well.
X Global Cloud Computing ETF (Claw – FREE REPORT (tracks INDXX GLOBAL CLOUD COMPUTING INDEX and WisdomTree Cloud Computing ETF)wcld – FREE REPORT) BVP tracks NASDAQ EMERGING CLOUD INDEX. The Global X Cloud Computing ETF has $570.93 million in assets and the WisdomTree Cloud Computing ETF has $594.64 million. CLOU has an expense ratio of 0.68% and a WCLD fee of 0.45%.
To learn more about this product and other ETFs, find products that align with your investment goals and read articles about the latest developments in the ETF investing world, please visit Zacks ETF Center.