60
The ETFMG Prime Cyber Security ETF ( HACK ) is likely to continue enjoying increased investor interest as long as cyber defense remains an integral part of a business’s security measures—and it appears as though it will. According to a report by Global Market Insights, the cybersecurity market has an expected compound annual growth rate of 15% through 2032 and is forecast to reach a market size of about $900 billion.
Learn more about the HACK ETF and see what’s in store for the cyber defense securities market.
Key Takeaways
- The HACK ETF invests in companies that create cybersecurity solutions.
- Spending on cybersecurity is expected to grow rapidly, with a CAGR forecasted to be as much as 15% through 2032.
- Cyber attacks on the U.S. government and businesses continue to make headlines, fueling growth expectations as the world migrates more to a digital landscape.
HACK ETF Overview
The HACK ETF, sponsored by ETF Managers Group LLC, or ETFMG, invests in companies that offer hardware, software, and services in the cybersecurity field. It is designed to track the performance of the Prime Cyber Defense Index (PCYBER), which includes “companies providing cybersecurity solutions that include hardware, software, and services.”
The fund launched in Nov. 2014, and as of Jan. 23, 2024, it has assets under management (AUM) of $1.7 billion.
Top Holdings
The fund has a total of 48 holdings. The top 10 holdings as of Jan. 23, 2024, are:
- CrowdStrike Holdings Inc. ( CRWD )
- Zscaler Inc. ( ZS )
- Fortinet Inc. ( FTNT )
- Palo Alto Networks Inc. ( PANW )
- BAE Systems Plc. ( BAESY )
- Cloudflare Inc. ( NET )
- Check Point Software Tech Ltd. ( CHKP )
- Gen Digital Inc. ( GEN )
- Cisco Systems Inc. ( CSCO )
- Okta Inc. ( OKTA )
Performance
As of Dec. 31, 2023, the fund had a one-year performance of 37.42%, a three-year performance of 1.91%, and a five-year performance of 12.92%. Since its inception, the fund has a performance of 10.64%.
As of Jan. 22, 2024, HACK closed at $63.39. The stock dropped significantly at the end of 2021 during the COVID-19 pandemic and continued to fall throughout 2022. The share price started to gain traction again in 2023 and took off in Oct. 2023.
Cyber Security Industry Outlook
According to research and consulting giant Gartner, “The continuous adoption of cloud, continuous hybrid workforce, rapid emergence and use of generative AI (GenAI), and the evolving regulatory environment are forcing security and risk management (SRM) leaders to enhance their security and risk management spending.”
Note
More digital solutions mean more demand for security and thus, more industry growth.
Gartner forecasts worldwide end-user spending on security and risk management to grow 14.3% in 2024 compared to 2023, for a total of $215 billion. The bulk of the growth is expected to come from increased spending on cloud security and data privacy, both of which are expected to increase by approximately 24.5%.
The security services segment, which includes consulting, IT, outsourcing, implementation, and hardware support, will be so in demand that in 2024 it will account for 42% of total security and risk management end-user spending.
What Companies Are in the HACK ETF?
There are 48 companies in the HACK ETF, including
- Palo Alto Networks Inc. ( PANW )
- BAE Systems ( BAESY )
- Cloudflare Inc. ( NET )
- Check Point Software Tech, LTD. ( CHKP )
What Is Better, CIBR or HACK?
Both are cybersecurity ETFs offered by different managers. CIBR seeks to track the Nasdaq CTA cybersecurity index, while HACK aims to mirror the Prime Cyber Defense Index. Both indexes have many of the same holdings and perform similarly, so one isn’t necessarily better than the other.
Does HACK ETF Pay a Dividend?
The HACK ETF does pay dividends, the last three of which were $0.08, $0.01, and $0.03. As of Jan. 22, 2024, it has a dividend yield of 0.53%.
The Bottom Line
With the ever-growing use of the Internet, automation, and artificial intelligence, the demand for cybersecurity is on the rise. Companies in this space can experience strong growth and profits if managed well.
For investors, the cybersecurity sector could be a good place to allocate part of their portfolios, depending on their risk tolerance and investment goals, with ETFs such as HACK making it easier to gain exposure to the sector.