Cybersecurity Investments Outperform S&P 500 10-Fold

Cybersecurity is booming. Investors in the sector have been rewarded with a 24% gain this year, compared with the S&P 500 index`s 2.1% rise, according to passive investment vehicle HACK, an exchange-traded fund focused on cybersecurity.

Source: Wikipedia

PureFunds ISE Cyber Security ETF (financial ticker HACK), which includes companies such as FireEye, CyberArk Software, Infoblox, Palo Alto Networks, Fortinet, AVG Technologies, AhnLab, Proofpoint, Juniper Networks and Imperva, crossed the $1bn mark this month, according to stock information provider ETF.com.

The value of shares traded has exceeded an average $30 million per day. HACK started on Nov. 13 from a daily share volume of 278,399 at $25.19 each and reached volumes over 2 million at $32.87 at the end of June.

HACK charges 75 bps, which is slightly above average when compared with other broad-based technology sector funds. HACK does not try to capture the broad technology market, but focuses both on companies that create cybersecurity hardware/software and those that provide cybersecurity as a service.

The potential beneficiaries of increased security spending range from large listed technology companies with cyber security units to small start-ups. Venture capital funding has been flooding into these smaller companies, which raised more than $1bn for the first time in a single quarter this year, according to private company research firm PrivCo.

Christian Magoon, consultant to ISE ETF Ventures and YieldShares founder, who helped launch HACK last autumn, has suggested the ETF could be used by hedge funds looking to offset the risk of cyber attacks on stocks they own, according to the Financial Times.

HACK also has the best performance in its segment in the last three months, with a 20 percent increase, eight times more than iShares Global Tech fund (financial ticker IXN), which includes Apple, Microsoft, Facebook, Intel and Google, as ETF insights show.

HACK companies originate mostly from the United States, with Netherlands, South Korea, Japan and Israel following.