Three top-performing ETFs offer investors exposure to the growing cybersecurity market without tying their investment to single stock. First Trust Nasdaq Cybersecurity, iShares Cybersecurity & Tech, and ETFMG Prime Cyber Security hold companies competing in a market estimated at potentially $2 trillion in size as the damage from cyberattacks reaches an estimated $10.5 trillion annually by 2025.
Key Takeaways
- The cybersecurity industry has underperformed the broader market in the past year.
- The top-performing ETFs in this industry are First Trust Nasdaq Cybersecurity, iShares Cybersecurity & Tech, and ETFMG Prime Cyber Security.
- Cisco Systems Inc., Class A shares of Booz Allen Hamilton Holding Corp., and BAE Systems PLC are the top holdings of these funds, respectively.
Four ETFs trade in the U.S. that focus on cybersecurity stocks, excluding inverse, leveraged, and funds with fewer than $50 million in assets under management (AUM). Measured by the Nasdaq CTA Cybersecurity Index, the sector has dropped 15% compared with an 8% decline in the S&P 500 Index during the past 12 months as of Dec. 1.
We examine the three top-performing cybersecurity ETF. All numbers are as of Dec. 1, 2022.
- Performance Over One-Year: -15.5%
- Expense Ratio: 0.60%
- Annual Dividend Yield: 0.11%
- Three-Month Average Daily Volume: 594,694
- Assets Under Management: $5.0 billion
- Inception Date: July 6, 2015
- Issuer: First Trust
CIBR is a multi-cap growth fund targeting U.S.-listed cybersecurity companies. It tracks the Nasdaq CTA Cybersecurity Index, made up of companies that focus on cybersecurity on the industrials and technology sectors. Each of the fund’s holdings must be classified as a cybersecurity company by the Consumer Technology Association, have a minimum market capitalization of $250 million, and meet certain liquidity requirements. The ETF’s three largest allocations are software, accounting for 45% of the portfolio, followed by IT services and communications equipment.
The ETF’s biggest holdings are Cisco Systems Inc. (CSCO), a networking, cloud, and cybersecurity firm; Broadcom Inc. (AVGO), a maker of semiconductors and infrastructure products; and sponsored ADRs of Infosys Ltd. (INFY), an Indian business consulting and IT company.
- Performance Over One-Year: -16.6%
- Expense Ratio: 0.47%
- Annual Dividend Yield: 0.13%
- Three-Month Average Daily Volume: 97,450
- Assets Under Management: $520.0 million
- Inception Date: June 11, 2019
- Issuer: BlackRock Financial Management
IHAK tracks the NYSE FactSet Global Cyber Security Index, comprised of emerging-market and developed-market cybersecurity companies that specialize in hardware, services and other areas. Information technology stocks comprise 85% of the fund’s assets, with the remainder in industrials. Almost three quarters of IHAK’s holdings are based in the U.S., with the rest in Israel, Japan, and other countries.
The largest holdings of IHAK include Class A shares of Booz Allen Hamilton Holding Corp. (BAH), which specializes in consulting, digital technology, and cybersecurity; Juniper Networks Inc. (JNPR), a maker of networking products and software; and Check Point Software Technologies Ltd. (CHKP), an American-Israeli network, cloud, and infrastructure security company.
- Performance Over One-Year: -19.7%
- Expense Ratio: 0.60%
- Annual Dividend Yield: 0.27%
- Three-Month Average Daily Volume: 109,614
- Assets Under Management: $1.5 billion
- Inception Date: Nov. 11, 2014
- Issuer: ETFMG
HACK utilizes the Prime Cyber Defense Index as a benchmark, focusing on hardware, software, and services companies. The fund is diversified across market caps, business focus, and geography, with its top 10 holdings representing about half of invested assets.
These include BAE Systems PLC (BA:LON), a British arms, security, and aerospace firm; Leidos Holdings Inc. (LDOS), a defense, IT, and systems integration company; and VeriSign Inc. (VRSN), which provides domain name registry and internet infrastructure services.
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