For all the attention that the cybersecurity theme and software stocks receive, it might be reasonable to assume the market is awash in dedicated cybersecurity exchange traded funds.
Actually, there are just four such funds on the market today following Tuesday's debut of the Global X Cybersecurity ETF /zigman2/quotes/214899428/composite BUG +1.48% .
Another addition to Global X's storied line of thematic funds, BUG “seeks to invest in companies that stand to potentially benefit from the increased adoption of cybersecurity technology, such as those whose principal business is in the development and management of security protocols preventing intrusion and attacks to systems, networks, applications, computers, and mobile devices,” according to the issuer.
The new BUG will compete against three established, but its primary rivals will be the ETFMG Prime Cyber Security ETF /zigman2/quotes/207892345/composite HACK +0.75% , the oldest cybersecurity ETF; and the First Trust NASDAQ Cybersecurity ETF /zigman2/quotes/200078153/composite CIBR +0.43% . HACK and CIBR have $1.44 billion and $1.03 billion in assets under management, respectively.
CIBR and HACK may seem to be immovable objects for the new BUG, but Global X has been down this road before. Earlier this year, the issuer launched the Global X Cloud Computing ETF /zigman2/quotes/211334933/composite CLOU +1.30% to compete with a rival First Trust fund. CLOU now has $459 million in assets under management, easily making it one of this year's most successful new ETFs.
Additionally, BUG has another way of competing with the aforementioned rivals. Its annual fee of 0.50%, or $50 on a $10,000 investment, is 10 basis points lower than the fees on CIBR and HACK.
The new Global X ETF tracks the Indxx Cybersecurity Index and holds 31 stocks. Its top 10 top holdings combine for over 56% of the rookie fund's roster.
Cybersecurity spending is on an exponential, upward trajectory. That favorable fundamental trait coupled with BUG's lower fee could be catalysts to drive assets to this new thematic fund.
“Global spending on security-related software, hardware and services could reach $124 billion by year-end as the number of malicious programs registered reaches a record 925 million,” according to Global X research. “By 2022, total global spending could reach $170.4 billion, a five-year compounded annual growth rate (CAGR) of 10.9%.”
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