First Trust has launched an exchange traded fund dedicated to cloud computing in another example of a new ETF that targets a specific investment theme or sector.
Cloud computing is the use of multiple servers available through one digital network. The servers can be accessed through any computer, notebook, tablet, Smartphone or other device. The processing and storage is all done by the cloud server, freeing up one’s own computer and storage space.
The First Trust ISE Cloud Computing Index Fund (NasdaqGM: SKYY) involves companies specifically involved in this much-hyped technology.
The new ETF has already drawn criticism for being “gimmicky,” and some have pointed out the difficulty of tracking the emerging sector. Water ETFs are another category that some say is a gimmick. [Diving Into the Water ETFs.]
Oliver Ludwig at Index Universe points out the First Trust Nasdaq CEA Smartphone Index Fund (NasdaqGM: FONE), launched in February 2011, has gathered only $16.5 million in assets. [First Trust’s Smartphone ETF]
Still, First Trust says cloud computing is projected by some researchers to be one of the fastest-growing IT markets this year.
“As businesses and consumers continue to migrate to a cloud environment, we believe there are significant growth opportunities for the companies involved in all aspects of cloud computing,” said Ryan Issakainen, vice president and ETF strategist at First Trust. “The ETF provides a way to gain diversified exposure to those companies.”
He added Forrester Research is projecting total public cloud revenues to rise 27% annually to reach nearly $160 billion by 2020, up from $15 billion in 2010.
Roger Nusbaum at TheStreet.com notes that the inclusion of Netflix (NasdaqGS: NFLX) in the new ETF has raised eyebrows.
“Despite the skepticism that some might have for a cloud computing ETF, the theme is legitimate and has plenty of investor interest,” he wrote. “The existence of an ETF simply offers another choice and for some investors interested in the cloud it will be the best choice, most likely because it offers access without single-stock risk.”
Tisha Guerrero contributed to this article.