Meet the Newest ETF in Cybersecurity

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A new cybersecurity exchange traded fund (ETF) hits the market Tuesday, July 7. The cybersecurity industry has grown massively this year, not just in popularity, but companies like FireEye Inc. (NASDAQ: FEYE) and CyberArk Software Ltd. (NASDAQ: CYBR) are each up over 45% so far year to date.

The fund that is entering the market is the First Trust Nasdaq CEA Cybersecurity ETF (NASDAQ: CIBR). The fund seeks investment results that correspond generally to the price and yield of an equity index called the Nasdaq CEA Cybersecurity Index.

This new ETF includes companies primarily involved in the building, implementation and management of security protocols applied to private and public networks, computers and mobile devices in order to provide protection of the integrity of data and network operations.

As more companies are experiencing high-profile cybersecurity breaches, the industry is gaining global attention. With the heightened need for cybersecurity solutions, First Trust believes this could be a favorable time to invest in cybersecurity companies. The index is designed to track the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors.

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Only one other ETF is operating in the cybersecurity field: Factorshares Trust – PureFunds ISE Cyber Security ETF (NYSEMKT: HACK). Currently, the fund has close to $775 million in assets and has returned over 20% to investors.

The top five holdings for HACK are:

  • Intralinks Holdings Inc. (NYSE: IL)
  • Proofpoint Inc. (NASDAQ: PFPT)
  • Imperva Inc. (NYSE: IMPV)
  • Science Applications International Corp. (NYSE: SAIC)
  • Palo Alto Networks Inc. (NYSE: PANW)

Ryan Issakainen, CFA, Senior Vice President, Exchange-Traded Fund Strategist at First Trust, said:

Along with the clear benefits of an increasingly interconnected world comes the growing need to ensure the security of cyberspace. This presents significant opportunities for companies involved with this task, many of which are not represented in traditional index ETFs. We believe this ETF provides a diversified, efficient way for investors to gain exposure to this important theme.

HACK closed Monday down 1.4% at $30.77, in a post-debut trading range of $24.44 to $33.91.

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