Is This the Time for Cyber Security ETFs?

With the coronavirus outbreak infecting millions of people worldwide, majority of the global population is now under lockdown. This has resulted in an unprecedented rise in Internet usage due to work-and-learn-from-home, online retailing of daily essentials, mobile payments to avoid contact transactions and socializing.

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.

As a result, global spending on cybersecurity is growing each year and will continue to increase indefinitely. Google GOOGL said it would invest more than $10 billion over five years to strengthen cybersecurity and pledged to train 100,000 Americans in technical fields such as IT support and data analytics through its Career Certificate program.

Microsoft MSFT plans to invest $20 billion over five years to deliver more advanced security tools, CEO Satya Nadella tweeted, as quoted on CNBC. He added that Microsoft would invest $150 million to help government agencies upgrade their security systems. Microsoft has expended $1 billion per year on cybersecurity since 2015. IBM IBM said it would train more than 150,000 people in cybersecurity skills in three years. The company also announced a new data storage solution for critical infrastructure companies.

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

ETFs in Focus

ETFMG Prime Cyber Security ETF (HACK)

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 3.34% share. The fund has amassed $2.39 billion in AUM and charges 60 bps in fees per year.

First Trust NASDAQ Cybersecurity ETF (CIBR)

This ETF has accumulated nearly $4.63 billion in its asset base and charges 60 bps in annual fees. 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 39 stocks in its basket with each accounting for less than 7.23% of assets.

Global X Cybersecurity ETF (BUG)

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 32 stocks in its basket with each accounting for less than 7.56% share. The ETF has accumulated $704.7 million in its asset base. It charges 50 bps in annual fees.

iShares Cybersecurity and Tech ETF (IHAK)

This fund provides access to companies at the forefront of cybersecurity innovation and follows the NYSE FactSet Global Cyber Security Index. It holds 42 stocks in its basket with each making up for no more than 5.15% of the assets. IHAK has AUM of $642.9 million and charges 47 bps in fees per year.

Simplify Volt Cloud and Cybersecurity Disruption ETF (VCLO)

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. The ETF is a high-cost choice, charging 1.02% in annual fees. It has accumulated $5.7 million in its assets since its inception in late December.

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