WisdomTree Cybersecurity Fund (NASDAQ:WCBR) is down about 5% year-to-date while the agentic AI buildout it was designed to benefit from is accelerating faster than almost anyone anticipated. That gap between thesis and performance is exactly why this fund is worth understanding right now.
WCBR holds 24 positions with 100% of assets in information technology, charging 0.45% annually for exposure to pure-play cybersecurity names. With around $83 million in net assets, it is a small, focused fund.
The top holding is Fastly (NYSE:FSLY) at 11.12%, followed by Palo Alto Networks (NASDAQ:PANW | PANW Price Prediction) at about 9% and Akamai (NASDAQ:AKAM) Akamai at about 7%. Fastly has surged 182% year-to-date, which partially explains why the fund has recovered nearly 7% over the past month even as the YTD figure remains negative. That single holding is moving the whole fund.
The Rate Environment Is the Macro Factor That Matters Most
WCBR’s holdings are high-multiple growth stocks. Palo Alto Networks (NASDAQ:PANW) trades at a forward P/E of 41x. CrowdStrike (NASDAQ:CRWD) carries a forward P/E of 67x. Valuations like these are acutely sensitive to real interest rates. When rates rise or stay elevated, the present value of future earnings compresses, and high-multiple stocks absorb the most pain.
The VIX currently sits near 26.8, in the elevated uncertainty zone, and has climbed roughly 37% over the past month. That reading puts it in the 93rd percentile relative to the past year. Elevated volatility and rate uncertainty compress growth stock multiples in tandem. If the Federal Reserve signals rate cuts, WCBR’s holdings would likely reprice upward quickly. The Fed’s dot plot, published after each FOMC meeting, is the most direct signal to watch.
Federal spending uncertainty adds a second layer of macro risk. SentinelOne (NYSE:S) explicitly flagged changes in U.S. federal spending as a risk to its business. DOGE-related cuts to civilian agency budgets could reduce government cybersecurity contract renewals, a headwind that would hit smaller pure-plays harder than enterprise-focused platforms.
The Holdings Concentration Problem Is the Micro Factor to Watch
WCBR’s index methodology creates a structural quirk worth understanding. Fastly, a content delivery network with cybersecurity features, holds the fund’s top weight at over 11%. Its 182% year-to-date gain has made it the single biggest driver of recent fund performance. But Fastly is not a core cybersecurity platform in the way that CrowdStrike or Palo Alto Networks are. Its weight reflects index construction rules, not its centrality to the agentic AI security thesis.
CrowdStrike, by contrast, posted $5.25 billion in ending ARR, up 24% year-over-year, and recorded its first-ever positive GAAP net income of $39 million in its most recent quarter. CEO George Kurtz described the company as “mission-critical infrastructure — securing AI across every layer: from GPU to agent to prompt.” Yet CrowdStrike sits at only about 6% of WCBR, well below Fastly.
Palo Alto Networks grew its Next-Generation Security ARR to $6.30 billion, up 33% year-over-year, and has held non-GAAP operating margins above 30% for three consecutive quarters.
Fortinet (NASDAQ:FTNT) generated $2.21 billion in free cash flow in FY25, a record. These are the companies generating durable cash flows from AI-era security demand. Their combined weight in WCBR is meaningful, but Fastly’s outsize position means the fund’s short-term returns can diverge from the underlying security-for-AI story.
WisdomTree publishes quarterly reconstitution details through its issuer fact sheet. If Fastly’s weight is trimmed and redistributed toward AI-native security platforms, the fund’s composition would more closely reflect the agentic AI thesis it aims to capture. Whether the fund’s composition shifts closer to the agentic AI security story it was built around depends on how WisdomTree’s next reconstitution weights the pure-play platforms against names like Fastly.
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