As our world moves more connected online, there is a rising presence of cybercriminals in every area of the web. For example, the cyberattack on two hospitals in France in February 2021 is a stark reminder that cyberattacks are growing at a fast pace, and the need to strengthen our ecosystem is more than ever before.
Here’s an overview of the cybersecurity space, and the investing opportunity it offers through exchange traded funds.
It is estimated that there were 96,905,187 devices with encounters in the last 30 days worldwide. In the U.S., this number was 5,910,153 while in Russia, China, and India, the figures were 5,772,460, 18,478,801, and 4,225,125, respectively. These numbers are a cause for concern.
The expansion of digital economy has seen a parallel rise of cybersecurity risks. While the number of companies and organizations relying on the Internet for their business operations has gone up over the years, preparedness hasn’t.
“It is estimated that almost 80% of organizations are introducing digitally-fueled innovations faster than their ability to secure it against cyberattacks,” according to an Accenture report.
A cyberattack can cause reputational damage, result in loss of competitive advantage, and steep financial damage. Cybersecurity Ventures expects “global cybercrime costs to grow by 15% per year over the next five years, reaching $10.5 trillion annually by 2025, up from $3 trillion in 2015.”
As a result, companies are investing in shielding themselves. According to PwC’s Global DTI 2021 survey, “55% of technology and security executives plan to increase their cybersecurity budgets, with 51% adding full-time cyber staff in 2021. Clearly, cybersecurity is more business-critical than ever before.” Jobs in the cyber security space are rising at a fast pace too. The U.S. Bureau of Labor Statistics (BLS) predicts that jobs for information security analysts will grow by 31% through 2029.
IDC projects the worldwide security spending to reach $174.7 billion in 2024 with a compound annual growth rate of 8.1% from 2020 to 2024. According to another report, the global cybersecurity market size is expected to reach $326.4 billion by 2027, registering a compound annual growth rate of 10% from 2020 to 2027.
ETFs are a good medium to invest in the cybersecurity space. Here’s a look at three popular ETFs in no specific order.
The First Trust NASDAQ CEA Cybersecurity ETF (CIBR)
Launched in 2015, the First Trust NASDAQ Cybersecurity ETF tracks the Nasdaq CTA Cybersecurity Index, which is a modified liquidity index comprising of companies engaged in the cybersecurity segment of the technology and industrial sectors. The ETF has close to $3.27 billion as assets under management, and an expense ratio of 0.6%. It provides exposure to around 40 stocks with a weightage based on liquidity and has 47% allocation to the top ten holdings, which include:
Crowdstrike Holdings
Zscaler
Cisco Systems
Accenture
Splunk
Fortinet
FireEye
Sailpoint Technologies
F5 Networks
Palo Alto Networks
The iShares Cybersecurity and Tech ETF (IHAK)
The iShares Cybersecurity and Tech ETF was launched in mid-2019. It tracks the NYSE FactSet Global Cyber Security Index, which is composed of developed and emerging market companies involved in cybersecurity and technology. The fund has allocations across different countries; U.S. leads with an 80% allocation followed by exposure to Israel (7%), Japan (4.5%), Canada (3.5%), Taiwan (2%), and the United Kingdom (1.5%). The fund has a corpus of $394.53 million and an expense ratio of 0.47%. The top ten holdings have a 46% allocation, and the list includes:
Crowdstrike Holdings
Palo Alto Networks
Juniper Networks
Citrix Systems
Zscaler
VMware
Proofpoint
Okta
Check Point Software Technologies
The Global X Cybersecurity ETF (BUG)
Launched in October 2019, the Global X Cybersecurity ETF (BUG) offers a compact portfolio of around 30 stocks in the cybersecurity space. It provides an opportunity to invest in companies that are positioned to benefit from the rising importance and increased adoption of cybersecurity technology. The fund tracks the Indexx Cybersecurity Index, and has 75% allocation towards the U.S., followed by Israel (11%), United Kingdom (7%), and Japan (5%). It has $802.45 million as assets under management and an expense ratio of 0.50%. The top ten holdings add up to 60%. The names include:
Crowdstrike Holdings
Palo Alto Networks
Fortinet
Zscaler
Okta
CyberArk Software
Varonis Systems
FireEye
Check Point Software Technologies
Proofpoint
As we become more and more connected via technology, the importance of cybersecurity will become increasingly crucial for protecting our daily lives.
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Article initially appeared on nasdaq.com
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