New ETF Targets Cloud Computing Sector

A new exchange traded fund (ETF) will offer investors the ability to invest in an index of public companies in the cloud computing sector. The First Trust ISE Cloud Computing Index Fund will be based on the ISE Cloud Computing Index, which tracks 40 stocks that either offer cloud services or will benefit from sales to cloud providers.

ETFs allow investors to target a sector or index, offering a level of diversification similar to mutual funds, but trade like a stock and typically have lower fees than either mutual funds or stocks. Since there are no existing mutual funds or ETFs that target cloud computing, The First Trust ISE Cloud Computing Index Fund (which will trade  under the symbol SKYY) will be of interest to investors looking to invest in the sector.

SKYY is expected to begin trading around July 6 on the NASDAQ exchange, according to a recent prospectus from First Trust.

The ISE index tracks both "pure play" companies - those whose business is based on cloud computing - as well as those that will benefit from cloud as a part of their larger business. As of May 31, the largest holdings in the ISE Index included data warehousing specialist Teradata (TDC), educaton-focused SaaS provider Blackboard (BBBB), Amazon (AMZN), networking software maker TIBCO (TIBX),  customer relationship management software maker RightNow Technologies (RNOW) and wireless networking specialist Aruba Networks (ARUN).