Designed to provide broad exposure to the Technology – Cloud Computing segment of the equity market, the First Trust Cloud Computing ETF (SKY – Free Report) is a passively managed listed index 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.
Sector ETFs are also convenience funds, offering many ways to gain low-risk, diversified exposure to a broad group of companies in particular sectors. Technology – Cloud Computing is one of 16 major Zacks sectors within the Zacks Industry classification. He is currently ranked 9, which puts him in the bottom 44%.
The fund is sponsored by First Trust Advisors. It has amassed assets of over $2.91 billion, making it one of the largest 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.
Expense ratios are an important factor in an ETF’s performance and over the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
The annual operating expense of this ETF is 0.60%, putting it on par with most peer products on the market.
It has a 12-month dividend yield of 1.31%.
Sector exposure and main holdings
It is important to delve into an ETF’s holdings before investing despite the many advantages of these types of funds such as 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 the largest allocation to the information technology sector, approximately 85.60% of the portfolio. Telecommunications and consumer discretionary round out the top three.
Looking at individual holdings, Mongodb, Inc. (MDB – Free Report) accounts for approximately 4% of total assets, followed by Pure Storage, Inc. (Class A) (PSTG – Free Report) and Arista Networks, Inc. (sides – free report).
The top 10 holdings represent approximately 34.21% of total assets under management.
Performance and risks
Year-to-date, the First Trust Cloud Computing ETF has lost around -40.13% so far and is down around -42.68% in the past 12 months (as of 11/24 /2022). SKYY has traded between $55.97 and $111.27 over the past 52-week period.
The ETF has a beta of 1.05 and a standard deviation of 34.69% for the three-year period, making it a medium-risk pick in the space. With approximately 71 holdings, it effectively diversifies company-specific risks.
The First Trust Cloud Computing ETF holds a Zacks ETF rating of 1 (Strong Buy), which is based on the asset class’s expected return, expense ratio, and momentum, among other factors. For this reason, SKYY is a great option for investors looking to gain exposure to the technology ETF segment of the market. There are other additional ETFs in the space that investors might also consider.
Global X Cloud Computing ETF (NAIL – Free Report) tracks the GLOBAL CLOUD COMPUTING INDEX and the WisdomTree Cloud Computing ETF (WCLD – Free Report) tracks the BVP NASDAQ EMERGING CLOUD INDEX. Global X Cloud Computing ETF has $570.93 million in assets, WisdomTree Cloud Computing ETF has $594.64 million. CLOU has an expense ratio of 0.68% and WCLD charges 0.45%.
To learn more about this product and other ETFs, research products that fit your investment goals, and read articles about the latest developments in the ETF investment universe, please visit Zacks ETF Center.
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