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ETFs in Focus as Cyber Security Market Momentum Picks Up

Sweta Jaiswal, FRM

Revolutionary technologies like AI, ML and IoT are fast changing  the business landscape by expanding opportunities, growing revenues and enhancing efficiencies. However, increasing adoption of these technologies is exposing businesses, governments and organizations to cyber risks. From Twitter CEO Jack Dorsey’s twitter account to Chinese telecommunication giant Huawei’s security chief, John Suffolk’s statement of seeing about a million cyberattacks per day on the company’s computers and networks, cyber attacks are emerging as  a serious global threat.

In fact, the FBI recently warned that one of its primary and very efficient defenses against cyber attacks, multi-factor authentication, was being circumvented through common social engineering and technical attacks.

How Serious is the Threat?

There have been numerous surveys conducted on the seriousness of cyber attacks. The survey results of the 2019 Travelers Risk Index emphasize on the fact that cyber risks top the list of concerns for business houses, according to Business Wire. In this regard, around 55% of the survey respondents accepted that they are more bothered about cyber risks in comparison to other types of business-related risks. In fact, there has been a rise in the number of businesses that have suffered cyber attacks. For instance, small business houses that suffered cyber attacks have risen from 4% in 2015 to 12% in 2019, while medium-sized business houses have seen a surge from 10% to 20% along with a rise to 33% from 19% in large businesses.

There has been a 12% rise from 2014 in global average cost of a data breach to $3.92 million. In fact, the global damage cost arising from cybercrime is expected to double to $6 trillion between 2015 and 2021, per Cybersecurity Ventures.  Moreover, according to an insurance carrier Hiscox, cyber attacks cost damages worth around $200,000 on average to small business. As a result, 60% of the victims shut down the business within six months of the attacks.  

Cyber Security Market Boom

Given the severity of the situation, global expenditures on IT security are expected to increase 8.7% year over year in 2019, per Gartner’s forecast. In fact, Cybersecurity Ventures expects the worldwide expenditure on cybersecurity to surpass $1 trillion cumulatively from 2017 to 2021.  Per a Grand View Research report, the global cyber security market is expected to reach a worth of around $241.1 billion at a CAGR of 11% from 2019 to 2025.

ETFs to Gain

Against the backdrop, investors can consider the following ETFs to gain from the growing opportunities in cyber security market.

ETFMG Prime Cyber Security ETF HACK — up 11.9% year to date

The fund is a portfolio of companies providing cyber security solutions that include hardware, software and services. It seeks investment results that correspond generally to price and yield, before fund fees and expenses, of the Prime Cyber Defense Index. Having amassed $1.43 billion in AUM, the fund charges 60 basis point in fees (read: Bet on BlackRock's Megatrends With These ETFs).

First Trust NASDAQ CEA Cybersecurity ETF CIBR — up 19%

The fund seeks investment results that correspond to the price and yield, before the fees and expenses, of the Nasdaq CTA Cybersecurity Index. It has AUM of $1.02 billion and an expense ratio of 0.60% (read: 5 Niche Tech ETFs to Grab at $30 or Below).

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ETFMG Prime Cyber Security ETF (HACK): ETF Research Reports
 
First Trust NASDAQ Cybersecurity ETF (CIBR): ETF Research Reports
 
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