The COVID-19 pandemic has brought upon many challenges and has had an effect on all aspects of our daily lives. Unfortunately, cybercriminals have aimed to capitalize on this pandemic which has resulted in businesses seeing a sharp increase in cyberattacks due to the adoption of work-from-home operating models. Having remote access to data adds another layer of complexity when trying to protect sensitive information accessed outside of the workplace¹ due to the dependency on personal devices, home networks, cloud based services, as well communicating over open, web based platforms such as Zoom, GoToWebinar, GoogleMeet, and others.²

Cyber criminals have been exploiting COVID-19 related fears by sending out coronavirus-related email subject lines. Around 25% of employees have seen an increase in fraudulent emails, spam and phishing attempts in their corporate email since the beginning of the COVID-19 crisis.³ The Canadian Anti-Fraud Centre said that for cyber fraud alone, it received 12,676 reports from 6,930 victims totalling $30.2 million in losses.⁴

^{Source: Proofpoint} 

In Canada, some of the biggest cyber attacks of this year include:

• The hack of 11,000 Government of Canada accounts, including 5,500 CRA accounts
• The data theft and ransomware attack on the government of PEI
• Koodo customer information sold on the dark web following data breach
• The data theft from the Royal Military College
• A ransomware attack on a Toronto chartered accounting firm
• Brookfield Residential suffered a data security incident

Impact on the Stock Market

With many companies not equipped to defend their networks from these cyberattacks, we can expect an increase in cybersecurity spending. According to research firm Gartner Inc, spending in cybersecurity services is forecast to grow 9% per year starting in 2021, and is projected to hit $207 billion by 2024. This growth is associated with the need to update security as threats continue to evolve.⁵

As a result, the  growth in cybersecurity stocks has benefitted investors, especially equity ETFs with exposure to the cybersecurity sector.

Options for Investors

If you’re an investor who is seeking access to a specific sector, investing in ETFs may be a better option for you. In comparison to individual stocks, ETFs may provide diversification and help reduce single stock risk. Investing in an ETF allows you to achieve greater diversification by spreading your capital across many companies and/or countries, thereby reducing the risk of investing in a particular one.

Evolve ETFs CEO, Raj Lala, recently stated that he believes cybersecurity is a “recession-proof” industry, as government leaders and CEOs are unlikely to decrease spending in this sector despite economic slowdowns. When speaking to Wealth Professional he said:

“In our cybersecurity fund… the performance variance between the best performing stock in our portfolio and the worst performing stock in our portfolio is over 200%…you might think that you’re picking the winner, but you could be picking the big loser. I always say that if you’re interested in a sector, don’t try to pick a stock in that sector, use an ETF that invests in that sector.”

How We Can Help With Your Investments

As a moderate investor, it can be challenging and tedious to research individual companies in the cybersecurity sector, as well as identify the leaders in an industry.⁶ Luckily, the Evolve Cyber Security Index Fund provides broad exposure to companies such as such as Okta Inc., Fortinet Inc., Palo Alto Networks Inc., Crowdstrike Holdings Inc., and FireEye Inc. to name a few*. ⁷

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Interested in learning about the opportunities and challenges in the cybersecurity industry?

Join us for our free Cybersecurity Awareness webinar on October 27. Click here to register.

For more information on the Evolve Cyber Security Index Fund or any of Evolve ETFs lineup of exchange-traded funds and mutual funds, please visit our website or contact Evolve ETFs.

 

*Evolve Cyber Security Index Fund portfolio, as at September 30, 2020.