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Specialty exchange-traded funds focused on cybersecurity are outperforming the broader technology sector year-to-date amid heightened interest in the fragmented cybersecurity market from companies, regulators and investors.
As of the close of trading May 4, ETF Managers Trust - ETFMG Prime Cyber Security ETF (HACK) and First Trust Exchange-Traded Fund II - First Trust NASDAQ Cybersecurity ETF (CIBR) were up about 15% and 13% year-to-date, respectively, compared to a 7% gain for broader technology fund Vanguard World Fund - Vanguard Information Technology ETF (VGT) and a 3% gain for the Nasdaq overall. Looking more broadly at the historical performance of HACK and CIBR, both of which are less than four years old, Vanguard's information technology fund was ahead, up 69% from January 2015 to May 2018 compared to the other two funds' gains of about 38% and 32%, respectively, and the Nasdaq's 53%. HACK began trading in late-2014; CIBR in mid-2015.
A generally bullish outlook for the cybersecurity sector is supporting the 2018 market trends. GBH Insights Chief Strategy Officer and Head of Research Daniel Ives said his team expects cybersecurity spending to hit $20 billion in three years.
"We believe cybersecurity is one of the golden subsectors of technology," Ives said in an interview. "I think it's the early innings of the growth."
The high-profile nature of recent cyberattacks and the corresponding regulatory concern is translating into increased cybersecurity investment on the part of corporations and investors,...