First Trust launches cloud computing ETF in Europe

Feb 15th, 2019 | By | Category: Equities

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First Trust Global Portfolios has launched the First Trust Cloud Computing UCITS ETF (FSKY LN) in Europe, providing thematic exposure to companies that are actively involved in the cloud computing space.

Cloud Computing ETFs

Cloud computing moves complex computer tasks into shared, decentralized services.

Cloud technology refers to shared pools of configurable computer system resources and higher-level services that can be rapidly provisioned with minimal management effort, often over the internet.

Through the delivery of computing services via the internet – from servers, storage, databases, networking, and software – cloud computing has helped fuel technological expansion by enhancing global accessibility and unveiling new ways to grow businesses.

Gregg Guerin, Senior Product Specialist, First Trust, commented, “Cloud Computing is the simple idea of moving complex computer tasks into shared, decentralized services, enabling people to store and access data from almost any location in the world. [The theme] continues to rapidly gain momentum.”

The fund is linked to the ISE Cloud Computing Index which also underlies a US-listed First Trust ETF that has accrued over $1.9 billion in assets under management since launching in 2011.

The index selects its constituents from a global pool of securities that have at least $100 million in assets under management.

Securities with exposure to the cloud computing theme are then classified according to the following three business segments: Pure-play companies, which are direct service providers for “the cloud”, actively supporting and forming cloud technology; non-pure-play companies, which are focused outside the cloud computing space but provide goods and services in support of the sector; and technology conglomerate companies, which are large broad-based firms that indirectly utilize or support the use of cloud computing technology.

Ten percent of the index weight is allocated to technology conglomerate companies. The remaining 90% is allocated between the pure-play and non-pure-play segments according to their relative market capitalizations. Constituents within each segment are equally weighted, and reconstitution and rebalancing occur semi-annually.

Guerin added, “The First Trust Cloud Computing ETF seeks to offer an efficient and innovative way to capitalize on this growing demand for the global public cloud market. Providing exposure to pure-play and non-pure play companies (i.e. those operating as direct services providers and those providing goods and services that use cloud computing technology), as well as investing in four key technology conglomerate companies, this growing market provides an exciting investment opportunity.”

The fund comes with a total expense ratio (TER) of 0.60%. It is available on the London Stock Exchange in US dollars (Ticker: SKYU LN) and pound sterling (FSKY LN), as well as on Euronext Amsterdam in euros (SKYE NA).

The fund will compete with the HAN-GINS Cloud Technology UCITS ETF (SKYY LN) which launched in October 2018. This ETF tracks the Solactive Cloud Technology Index, consisting of 50 companies globally operating in the field of cloud-based software and services. Stocks are selected using natural language processing which identifies thematic exposures in companies using unconventional data sources. The index is weighted by free-float market cap with a single issuer cap of 4%. The fund comes with a slightly higher TER of 0.75%.

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