Cybercrime:
the rising threat of hackers
And how investors can access this growth theme
A real and
global threat
Corporations
and governments
Key cybersecurity
trends for 2020
Investing thematically
The benefits of
active research
Noticed a surge in phishing emails? As we spend more of our professional and personal lives online, a trend accelerated by the COVID-19 pandemic, cyber security has become an inescapable issue.
Individuals
4.5bn users
100bn IoT
devices
£183m fine
$6m ransom
$151bn spend
on security
$3.6m per firm
$6trn per year
$157bn
market worth
$17.5bn US
govt. spend
AI & machine
learning in
cyber security
Multi-factor
authentication
or biometrics
Cloud
security
Internet of things (IoT)
with end-to-end security
First to market
2nd of 8 funds
Unique basket
Identifying
Building
Purity
Performance
Key fund stats
2015
$1.7bn
0.75%
London Stock
Exchange
Top 5 Constituents (%)*
Key Risk Warning
Important information
The next big theme
Number of Internet users worldwide today.
By 2025 there will be 100 billion IoT (Internet of Things) connected devices, all in desperate need of cyber security.
Source: Research and Markets
In 2019 British Airways* were fined £183m after a data breach, which saw 500,000 customers’ data and 380,000 transactions affected.
Source: BBC
On New Year’s Eve, 2019, a cyber-attack forced foreign exchange company Travelex to turn off all their computers and close websites across 30 countries to protect customer data. The hackers claimed to be in possession of users’ dates of birth, credit card numbers and national insurance numbers. Hackers demanded $6m in ransom, and shares in parent group Finablr* tumbled.
Source: BBC
A forecast from IDC estimates worldwide spending on security-related hardware, software and services will reach more than $151bn in 2023, with a compound annual growth rate of 9.4% over this period.
Source: Ponemon Institute, 2017 Cost of Data Breach Study
Estimated cost of data breach for an individual firm.
Source: Cybersecurity Ventures
The estimated annual cost
of cybercrime is expected
to exceed $6trn by 2021, growing about 12% annually.
Source: The White House
The US government alone is expected to budget as much as $17.5bn for cyber security in 2020.
Source:www.grandviewresearch.com/
industry-analysis/cyber-security-market
In 2019 the market was worth $157bn and is expected to expand at a CAGR of 10% from 2020 to 2027.
Investors are showing an increasing interest in the megatrend of cyber security.
However not all strategies provide the exposure to the cyber security theme investors are seeking. This is because they either rely on traditional sector classifications rather than active research and so may not reflect the full cyber security industry, or are backed by non-specialist research firms with poorer track records and less sophisticated analytical capabilities.
In 2015 Europe's first
cyber security ETF was launched, the L&G Cyber Security ETF.
It was one of the first funds
in the disruptive tech range (today there are eight ETFs in the range).
Partnering with Nasdaq and tracking the ISE Cyber Security UCITS Index, the ETF offers broad exposure to a unique basket of selected cyber security companies.
Cyber security is about more than viruses and malware,
so L&G ETF uses active research to identify leading companies in the broader
cyber security ecosystem.
To build an index that spans
the full cyber security ecosystem and focuses on pure-play cyber security companies from around
the world, L&G ETF works with NASDAQ.
Rebalanced every quarter, the average cyber security revenue share for the index is currently above 75% and has historically been consistently at that level or higher.
Source: Bloomberg; all in USD; as at 30 June 2020.
All returns, correlations and volatilities are based on data in USD. Dates are from 30 June 2015 to 30 June 2020 unless otherwise stated.
Sharpe ratios are based on 5 year annualised returns, 5 year annualised volatility and a risk free rate of 1.2% (average of US 5yr rates over 1 year).
The index was launched on 31 August 2015. In the period prior to that, the index values were simulated and were based on back-tested data. Simulated past performance data does not represent actual performance and should not be interpreted as an indication of actual or future performance.
The value of an investment and any income taken from it is not guaranteed and can go down as well as up; you may not get back the amount you originally invested.
The combination of active research, proactive index design and a differentiated portfolio has led to a strong performance from the ISE Cyber Security UCITS Index.
Past performance is not a guide to the future. The value of an investment and any income taken from it is not guaranteed and can go down as
well as up; you may not get back
the amount you originally invested.
Reference to a particular security
is for illustrative purposes only, is
on a historic basis and does not
mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.
Key risks
Launch date
Fund size*
*As at 31 July 2020
TER
USPY (USD)
1. FireEye inc.
2. Qualys inc.
3. Cyberark software
4. Check point software
5. Cloudflare inc.
2.87
2.75
2.75
2.70
2.68
The value of an investment and any income taken from it is not guaranteed and can go down as well as up, you may not get back the amount you originally invested.
Copyright © 2020 Legal & General. This document is subject to copyright. Any unauthorised use is strictly prohibited. All rights are reserved.Issued by Legal & General Investment Management Limited, as the promoter and distributor for this UCITS ETF. Registered Address: One Coleman Street, London, EC2R 5AA. Authorised and regulated by the Financial Conduct Authority, No 119272. All features described in this document are those current at the time of publication and may be changed in the future. Nothing in this factsheet should be construed as advice and it is therefore not a recommendation to buy or sell securities. If in doubt about the suitability of this product, you should seek professional advice. Copies of the prospectus, key investor information document, annual and semiannual reports & accounts are available free of charge on request or at www.lgimetf.com. This document is only directed at investors resident in jurisdictionwhere our funds are registered for sale. It is not an offer or invitation to persons outside of those jurisdictions. We reserve the right to reject any applications from outside of such jurisdictions.
ETF63882020
Cumulative return in USD
Annual index performance
*Reference to a particular security is for illustrative purposes only, is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.
Nasdaq’s Research and Development team consists of 18 analysts who each have between two and 20 years of experience in the financial markets and index design, including: five analysts who are responsible for the day-to-day management of the ISE Cyber Security UCITS Index and three analysts who are responsible for the classification and selection of companies into the index.
The UK Government’s National Cyber Security Centre has already warned of cybercriminals seeking to exploit the pandemic, with
cyber-attacks posing a threat not only to individuals but also to corporations and governments, as they can cause security, financial and reputational damage.
For Professional Clients Only. Not to be distributed to Retail Clients
Investors are showing an increasing interest in the megatrend of cyber security.