Cybersecurity ETF Jumps After Big Breach

The cleverly named ‘HACK’ is pulling in assets and shooting higher as cyberthreats abound.

Olly
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Managing Editor
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Reviewed by: Olly Ludwig
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Edited by: Olly Ludwig

The PureFunds ISE Cyber Security ETF (HACK | C-22), the highly successful fund of companies that design anti-viral and anti-malware products, has jumped more than 5 percent in the wake of revelations that last week a breach of U.S. government computers by Chinese hackers has compromised data on some 4 million federal employees.

HACK’s jump—4 percent on Friday and another 2 percent today—recalls the buzz when the fund first came to market last fall amid a slew of significant hacking stories. Retailers, including Home Depot and Target, were in the news, and the release of the film “The Interview” amid allegations that Sony Pictures had been hacked by North Korea put a tail wind behind HACK, making it something of an instant hit.

The fund now has more than $867 million in assets under management—50 percent more than it had in winter, according to data compiled by ETF.com. It looks quite likely that it will reach $1 billion in AUM milestone before long. That said, HACK will soon face competition from other funds.

The latest breach at the hands of Chinese hackers was of the computer system of the U.S. Office of Personnel Management, which occurred last December, according to a report published in the Washington Post. It was the second attack on the agency by Chinese hackers, and follows by a year an attack on White House and State Department email last year by Russian hackers.

In all, it points to sharp growth in cyberespionage—a trend geopolitical consultant Ian Bremmer predicted in an interview with ETF.com back in 2011. For an ETF like HACK, those threats have translated into rapid asset gathering and returns well above both market benchmarks like the S&P 500 Index, and diversified tech funds such as the Technology Select Sector SPDR Fund (XLK | A-89).

The chart below, dating back to HACK’s launch on Nov. 12 of last year, explains why some advisors are using HACK as a way to round out broader tech coverage.

Chart courtesy of StockCharts.com

Olly Ludwig is the former managing editor of etf.com. Previously, he was a financial advisor at Morgan Stanley Smith Barney and an editor at Bloomberg News. Before that, Ludwig was a journalist at the Reuters News Agency in New York.