Cybersecurity
Published by Radif Partners · Updated
Palo Alto, CrowdStrike, Fortinet, digital security in an increasingly connected world
This page compares 3 funds in the Cybersecurity category, with ongoing charges from 0.45% to 0.60% and a median of 0.60%. The gap between the cheapest and the dearest is worth roughly €150 over ten years on €10,000 invested: for a comparable index, that is the most reliable difference between two funds, because it rests on no assumption about markets. 1 of the 3 funds are accumulating and 3 replicate their index by holding its securities, the others using a swap. The largest fund in the list is CIBR, which matters less for returns than for the risk of closure: a fund that stays small usually ends up merged. Past performance is not used to rank this list: over the horizons published it says more about the index being tracked than about how the fund is run.
3
0.55%
+32.2%
0.45%
+36.5%
A theme carried by non-discretionary spending, at a high price
Cybersecurity has a rare economic feature: the spending is largely non-discretionary. A company cuts its marketing budget in a recession, rarely its security budget, the more so as European regulation, through NIS2 and DORA, now imposes duties whose breach engages directors' liability. That gives the sector steadier growth than software as a whole, and subscription models whose revenue renews automatically, which is why valuations stay permanently high.
The other side is precisely that valuation. Sector indices regularly trade at five to ten times revenue, against three to four for broad software: a growth disappointment of a few points then costs tens of per cent in share price. The second thing to check is the index definition. Some companies in the basket draw most of their revenue from activities unrelated to security, network hardware or general IT services, and their presence dilutes the theme the fund claims to follow. The full holdings list, published daily, is the only way to verify it.
What the funds in this category show
Where the money actually sits
The category holds 3 funds and 21.2B in combined assets, and those assets are not spread evenly. First Trust NASDAQ Cybersecurity ETF (CIBR), run by First Trust, holds 17.3B on its own, and the three largest, First Trust NASDAQ Cybersecurity ETF (CIBR), ETFMG Prime Cyber Security ETF (HACK) and WisdomTree Cybersecurity UCITS ETF - USD Acc (WCBR), account for 100.0 % of the total. At the other end, WisdomTree Cybersecurity UCITS ETF - USD Acc (WCBR) manages only 591M. Size is no guarantee of quality, but it decides two very concrete things: the spread between buying and selling price you pay on every order, and the odds that the fund still exists in ten years.
The fee gap, in money
Ongoing charges run from 0.45 % for WisdomTree Cybersecurity UCITS ETF - USD Acc (WCBR) to 0.60 % for ETFMG Prime Cyber Security ETF (HACK), a gap of 0.15 points, against a category average of 0.55 %. On £10,000 held for ten years that gap is roughly 150 in extra charges, before counting the return that money would itself have earned. It is the one variable in the comparison known in advance: past performance does not repeat, fees repeat every year.
Two funds in one category do not hold the same basket
The 3 funds listed track 3 different indices, among them Nasdaq CTA Cybersecurity, Prime Cyber Defense and WisdomTree Team8 Cybersecurity. The largest tracks Nasdaq CTA Cybersecurity. That spread is why two funds filed under the same theme can differ by several points over a year: they hold different securities, weight them differently and rebalance on different dates. Each fund page names its index, and that is where a serious comparison starts.
Replication and domicile
All 3 funds in the category replicate their index physically: they hold the securities. What remains to check is whether the fund lends those securities, which the key information document states, and how much: lending income lowers the real cost, counterparty risk adds to market risk.
2 of the 3 funds are domiciled in US, the rest in IE. Domicile sets the withholding tax the fund itself suffers on the dividends it receives, a cost absent from the stated fee but present in the return, and it also sets your own tax treatment depending on where you live.
Accumulate or take the income
1 funds accumulate dividends, 2 pay them out. The largest accumulating share class is WisdomTree Cybersecurity UCITS ETF - USD Acc (WCBR), the largest distributing one First Trust NASDAQ Cybersecurity ETF (CIBR). The choice is not about yield, both versions of the same index return the same before tax, but about tax and discipline: the accumulating class reinvests with no cost and no decision, the distributing class pays income that is taxable in the year it arrives.
Age and critical size
The oldest fund in the category, ETFMG Prime Cyber Security ETF (HACK), launched on 2014-11-11, giving 12 years of history, and the newest, WisdomTree Cybersecurity UCITS ETF - USD Acc (WCBR), on 2021-03-31. A long record shows how the fund behaved in a fall, which no one-year number can. A fund launched two years ago has lived through a single market regime.
None of the 3 funds manages under 100 million, the smallest being WisdomTree Cybersecurity UCITS ETF - USD Acc (WCBR). The category is therefore clear of closure risk for want of size, the risk that forces a sale on the issuer's timetable rather than the holder's.
Frequently asked questions
Why invest in cybersecurity ETFs?
Cybersecurity spending grows consistently as digital threats increase. The sector benefits from recurring revenue models and mission-critical demand that persists through economic cycles. Check the figure in the key information document of the exact share class your broker offers, since two classes of the same fund can differ on charges and on distribution policy.
What companies are in cybersecurity ETFs?
Major holdings include Palo Alto Networks, CrowdStrike, Fortinet, Zscaler, and SentinelOne. These companies provide network security, cloud security, and endpoint protection. What matters more than the ranking is whether the underlying index suits your horizon and your tolerance for a fall of thirty per cent, which no score can decide for you.
Are cybersecurity ETFs volatile?
Cybersecurity ETFs have moderate-to-high volatility (20-25% annualized). Many holdings are growth companies with high valuations, making them sensitive to interest rate changes and market sentiment. Past performance over these horizons says more about the index than about the fund, which is why the comparison here weighs cost, size and tracking quality instead.
Cybersecurity vs broad tech ETF: which is better?
Cybersecurity ETFs offer focused exposure to a resilient sub-sector but are more concentrated. Broad tech ETFs provide diversification across software, hardware, and semiconductors. Consider cybersecurity as a complement to broad tech. Over a ten-year horizon the ongoing charge weighs more than any difference in past performance: 0.20% against 0.50% on €10,000 is about €300, compounded.