Cyber security is now high on the agenda of companies. Not least, the pandemic with the trend toward home offices has accelerated this trend. A look at cyber attacks shows that the threat is growing exponentially. In Switzerland alone, the number of cases reported to the National Cyber Security Center (NCSC) roughly doubled to 10,234 in the first half of 2021. Above all, extortion attempts and phishing, i.e. the illegal acquisition of personal data, are booming.
The damage caused by cyber criminals is enormous. According to estimates by the UN organization International Telecommunication Union (ITU), it totaled USD 6 trillion worldwide last year. No wonder, then, that the business community is upgrading to strengthen its security infrastructure. Grand View Research projects that the global cybersecurity market, which was worth USD 167.13 billion in 2020, is expected to grow at a compound annual rate (CAGR) of 10.9% through 2028.
This shows that the mobilization of tightened cybersecurity strategies by enterprises and governments is by no means a short-term phenomenon. On the contrary, defenses against online threats are gaining long-term importance as the digital landscape continues to change. For example, with the advent of the Internet of Things (IoT), companies are increasingly relying on massive amounts of data, with large amounts of sensitive information to be processed and stored, which in turn does not allow for vulnerabilities in interfaces. According to research by Kaspersky, there were 1.5 billion IoT attacks worldwide in the first six months of last year alone, representing 100 percent growth compared to 2020. The rise of e-crime is driving disproportionate investment in this area. Markets and Markets estimates that the IoT security market will expand from USD 14.9 billion in 2021 to USD 40.3 billion in 2026 at a CAGR of 22.1%.
In view of these promising growth prospects, it is also time for investors to turn their attention to the topic of IT security. Especially since industry giants such as NortonLifeLock, Palo Alto Networks and Fortinet are not only enjoying flourishing business, but also rising share prices. While the former gained 36% over a one-year period, Palo Alto, which specializes in firewalls and cloud-based solutions, managed to increase by half. Fortinet, which is also committed to comprehensive network protection, was even able to more than double its enterprise value. The trio is also members of the Solactive Online Security Index. Since its launch in June 2011, the EUR-denominated barometer has advanced by an impressive 752%. This results in an average annual return of 22.5%.
Only companies whose business focus is on data security, in particular online data security, are included in the strategy barometer, more than 80% of which is currently made up of US stocks. In total, the index is populated with 15 international companies, which are weighted according to market capitalization. The current leaders are Palo Alto Networks and Fortinet, each with a weight of more than 12%. To ensure that the composition always remains fresh and that there are no lumps, it is reviewed every six months and adjusted if necessary. An annual management fee of 1.2% is charged for this process, but since the index is a total return variant, the dividends of the companies are included in the price calculation.
Since the topic of IT security is of a long-term nature, the diversified index is ideally suited to get involved in the megatrend. Leonteq offers two options in this regard: On the one hand, a CHF-denominated tracker(ISIN CH0122850172), on the other hand, a USD variant(ISIN CH0122850198). Both have an open-end structure, so that the products are ideally suited to the required medium to long-term investment horizon.
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