Back to top

Image: Bigstock

A Quick Guide to Cyber Security ETFs

Read MoreHide Full Article

The cyber security industry has gained immense popularity in recent years and is the fastest-growing corner of the broad technology space. This is because cyber attacks on enterprises and government agencies are widespread with rapidly growing blockchain, IoT and 5G technology, raising the need for more stringent cyber security from hackers.

New mobile technologies have also increased mobile attacks, leading to a spike in protection against cyber threats. Additionally, we have seen years’ worth of digital transformation in months in the wake of the COVID-19 pandemic. The digital transformation has further increased the risk of security breaches and threats (read: Cybersecurity Stocks & ETFs Soar after Massive Hack).

As a result, global spending on cybersecurity is growing each year and will continue to increase indefinitely. Gartner estimates the global information security market to grow at a five-year CAGR of 8.5% to $170.4 billion in 2022. According to Canalys, the worldwide cybersecurity market is poised to grow by 10% this year to $60 billion. Web and email security (12.5%) will grow the most, followed by vulnerability and security analytics (11%), data security (6.6%) and network security (8%).

Per Statista, spending on cybersecurity solutions is set to soar to nearly $250 billion by 2023. According to a study by Markets and Markets, the global cybersecurity market is projected to grow to $248.26 billion by 2023 from $152.7 billion in 2018 at a CAGR of 10.6%. North America is forecast to hold the biggest market size because of the presence of many key players and tech companies in the region. At the second spot is Europe, followed by APAC.

Investors seeking to tap the boom in the cyber security market could consider the following ETFs. We have highlighted them in detail below:

ETFMG Prime Cyber Security ETF (HACK - Free Report)

The fund provides global exposure to the cybersecurity industry, comprising companies that offer hardware, software, consulting and services to defend against cybercrime. It tracks the Prime Cyber Defense Index, holding 60 securities in its basket with each accounting for less than 3.5% share. The fund has amassed $2 billion in AUM and charges 60 bps in fees per year. Volume is solid as it exchanges nearly 283,000 shares in hand per day.

First Trust NASDAQ Cybersecurity ETF (CIBR - Free Report)

This ETF has accumulated nearly $3.2 billion in its asset base and charges 60 bps in annual fees. It trades in a good average daily volume of around 791,000 shares. The fund follows the Nasdaq CTA Cybersecurity Index, which measures the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors. In total, the product holds 41 stocks in its basket with each accounting for less than 8% of assets (read: Cybersecurity ETFs in Focus on Q4 Earnings Strength).

Global X Cybersecurity ETF (BUG - Free Report)

This ETF offers exposure to the companies that stand to benefit from the increased adoption of cybersecurity technology and follows the Indxx Cybersecurity Index. It holds 27 stocks in its basket with each accounting for less than 8% share. The ETF has accumulated $787.2 million in its asset base and trades in an average daily volume of 306,000 shares. It charges 50 bps in annual fees.

iShares Cybersecurity and Tech ETF (IHAK - Free Report)

This fund provides access to companies at the forefront of cybersecurity innovation and follows the NYSE FactSet Global Cyber Security Index. It holds 45 stocks in its basket with each making up for no more than 5.2% of the assets. IHAK has AUM of $390.4 million and charges 47 bps in fees per year. It trades in volume of 191,000 shares a day on average (read: 5 ETFs At The Forefront of Tech Rebound).

Simplify Volt Cloud and Cybersecurity Disruption ETF (VCLO - Free Report)

This thematic investment product is actively managed and is designed to concentrate on those few disruptive companies poised to dominate the new era of the cloud and then enhance the concentrated exposures with options. It holds 19 securities in its basket with the largest allocation in the top three firms that collectively make up for 65.6% of the total assets. The ETF is a high-cost choice, charging 1.02% in annual fees. It has accumulated $1.3 million in its assets since its inception in late December and trades in an average daily volume of 7,000 shares.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

Published in