Seven years ago, there were no dedicated cybersecurity exchange traded funds. Owing in large part to the success of the First Trust Nasdaq Cybersecurity ETF (CIBR), that’s no longer the case.
In fact, CIBR’s success has spurred the creation of several rival funds, bringing credibility, enhanced liquidity, and more assets to what was once a non-existent corner of the ETF realm. CIBR, which tracks the Nasdaq CTA Cybersecurity Index, remains the king of this space.
“Over the past seven years, cyber ETFs have grown from zero to $8.7 billion in assets, a compound growth rate of 122%. As of the market close on Oct. 12, there is now over $4.8 billion in the largest cyber ETF, First Trust’s CIBR (CIBR), which tracks an index jointly created by Nasdaq and the Consumer Technology Association (CTA) and trades around $45 million per day,” says Nasdaq Chief Economist Phil Mackintosh.
As of Oct. 22, CIBR has $5.31 billion in assets under management, according to issuer data. CIBR is the seasoned veteran of the cybersecurity ETF segment, and investors continue displaying enthusiasm for the fund, as highlighted by year-to-date inflows of $1.37 billion, or more than 20% of the fund’s assets under management tally.
Plenty of that enthusiasm stems from a spate of headlines pertaining to cyberattacks, which have historically motivated investors to get involved in cybersecurity stocks and ETFs like CIBR.
“It’s probably not surprising that cyber ETFs have seen strong growth, as data shows that cybercrime is increasing, and with that, losses from companies affected by breaches are also growing,” adds Mackintosh. “Furthermore, other studies show that not only is the global cybersecurity market growing but also that a majority of Chief Information Officers are prioritizing cybersecurity spending for this year, with 61% of the more than 2,000 CIOs surveyed increasing investment in cyber/information security in 2021.”
Indeed, CIBR is responsive to cybersecurity-related headlines. Over the past three years, the First Trust fund is higher by nearly 114%, and it’s been slightly less volatile than the S&P 500 Technology Index over that same span.
“Cyber ETFs are yet another way that investors can quickly, cheaply and easily gain access to a diversified portfolio of companies with exposure to just one theme,” concludes Nasdaq’s Mackintosh. “As we round out Cybersecurity Awareness Month, it’s good to be aware of the growth and popularity of cyber ETFs that align with a threat that, sadly, seems unlikely to quickly fade away.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.