A covert attack is the hardest to combat. While the increasing use of internet-enabled interconnected devices and other technologies has created an advanced ecosystem, it has also given rise to cyber threats. Hence, the need for cybersecurity is being felt more than ever before.
The year 2021 has been one of the worst on record for cybersecurity with the number of publicly reported data compromises during the first nine months of the year exceeding the total number of events in 2020 by 17%, according to the Data Breach Analysis by the Identity Theft Resource Center (ITRC). And this trend is expected to continue. A PwC survey highlights that more than 50% of organizations expect a surge in reportable incidents next year. Around 69% of organizations that participated in the survey said that they will increase their cyber spending in 2022, compared to 55% in the previous year.
Cybersecurity is a persistent concern not just among organizations. Even individuals are worried about cybercrime. The results of a study from the Pearson Institute for the Study and Resolution of Global Conflicts at the University of Chicago and The Associated Press-NORC Center for Public Affairs Research show that “91% of Americans are at least some concerned about attacks on financial institutions, including 68% who are very concerned.”
A cyberattack can cause reputational harm, downtime, damaged staff morale, loss of competitive advantage and steep financial loss. A report by McAfee estimates that monetary loss from cybercrime can be approximately $945 billion to the global economy.
The cybersecurity market is expected to reach $352.25 billion by 2026, registering a CAGR of 14.5% during 2021 to 2026.
Exchange-traded funds (ETFs) are a good medium to invest in the cybersecurity space. Here’s a look at some popular ETFs that provide good investing opportunities in companies that are at the forefront of guarding today’s world against cybercrime.
The First Trust NASDAQ CEA Cybersecurity ETF (CIBR) is among the oldest cybersecurity ETFs. Launched in 2015, the ETF tracks the Nasdaq CTA Cybersecurity Index, which is a modified liquidity index comprising of companies engaged in the cybersecurity space. The ETF has close to $5.56 billion as assets under management, and an expense ratio of 0.60%. It provides exposure to around 35 stocks with around 47% allocation to the top ten holdings that include:
Launched in October 2019, the Global X Cybersecurity ETF (BUG) offers exposure to a compact portfolio of 30 to 35 companies that are positioned to benefit from the rising importance and increased adoption of cybersecurity technology. The fund tracks the Indxx Cybersecurity Index, which includes companies across geographies. The allocation towards the U.S. is at 68.6% followed by the United Kingdom (13%), Israel (11.7%) and Japan (6%). It has $1.12 billion as assets under management and an expense ratio of 0.50%. The top ten holdings add up to around 56%.
- Palo Alto Networks (PANW)
- Check Point Software Technologies (CHKP)
- Fortinet (FTNT)
- Zscaler (ZS)
- Okta (OKTA)
- Avast (AVASF)
- Trend Micro (TMICF)
- CrowdStrike Holdings (CRWD)
- NortonLifeLock (NLOK)
- Tenable Holdings (TENB)
The iShares Cybersecurity and Tech ETF (IHAK) was launched in June 2019. It tracks the NYSE FactSet Global Cyber Security Index, which is composed of developed and emerging market companies involved in cybersecurity. While close to 80% of its allocations are in the U.S., it offers exposure to companies in Israel (7.43%), Japan (5.23%), Taiwan (2.91%), and Canada (2.86%). The fund has a corpus of $689.2 million and an expense ratio of 0.47%.
- Zscaler (ZS)
- Palo Alto Networks (PANW)
- Fortinet (FTNT)
- Juniper Networks (JNPR)
- Trend Micro (TMICF)
- Okta (OKTA)
- Booz Allen Hamilton Holding (BAH)
- CrowdStrike Holdings (CRWD)
- Akamai Technologies (AKAM)
- CACI International (CACI)
Launched in January 2021, WisdomTree Cyber Security Fund (WCBR) is the newest addition to the ETF space. The ETF tracks the WisdomTree Team8 Cybersecurity Index, which constitutes around 28 companies with close to 90% allocations towards large- and mid-caps. The top ten holdings make 51% of the portfolio. WCBR has $45 million as assets under management and an expense ratio of 0.45%.
- Datadog (DDOG)
- Cloudflare (NET)
- Palo Alto Networks (PANW)
- Rapid7 (RPD)
- Okta (OKTA)
- Zscaler (ZS)
- SailPoint Technologies Holdings (SAIL)
- Tenable Holdings (TENB)
- CrowdStrike Holdings (CRWD)
- Trend Micro (TMICF)
In addition, there is the Simplify Volt Cloud and Cybersecurity Disruption ETF (VCLO) and ProShares Ultra Nasdaq Cybersecurity ETF (UCYB), the latter being a 2X leverage ETF.
Disclaimer: The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration. The report has been carefully prepared, and any exclusions or errors in it are totally unintentional. Scheme data and details based on factsheet from respective websites as on December 8, 2021.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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