The World Economic Forum, in its assessment of the biggest threats to the global economy in 2017, said that the No. 1 risk to the U.S. this year is cybersecurity. In the ETF universe, there are two ETFs that invest solely in that theme, offering exposure to cybersecurity-related product and service providers.
The two ETFs, the PureFunds ISE Cyber Security ETF (HACK) and the First Trust Nasdaq Cybersecurity ETF (CIBR), are very similar in composition, tapping into a relatively small universe of anti-hacker stocks. And they both had a stellar year in total returns in 12 months, as the chart below shows.
Chart courtesy of StockCharts.com
But there are some key differences between the two, which help explain their different performances: 24.5% for CIBR versus 18.9% for HACK.
The first to market, and the most popular of the two, is HACK. The ETF HACK raced to more than $1 billion in assets in a matter of months after it launched in November 2014.
The timing of the launch was key. Repeated cyberattacks—the Sony hack was the most notable—were happening across the U.S. Today the fund has almost $790 million in assets under management. However, it faces growing competition from CIBR, which has $141 million in AUM and a relatively stronger performance in recent months.
Here are some of the key differences between the two funds:
In theory, it costs more to own HACK—a price difference that has to be made up in performance. HACK has an expense ratio of 0.75% compared with CIBR’s expense ratio of 0.60%, or in other words, HACK is 20% more expensive than CIBR.
But when it comes to trading these funds, HACK has traded with an average spread of 0.10% in the past 45 days, putting its total cost of ownership at about $85 per $10,000 invested. CIBR, however, has traded in that same period with a wider average spread—0.25%—bringing its overall cost of ownership to the same level of 0.85%.