Large scale cyber-attacks (Equifax, Sony, Target, etc.) continue to represent one of the most significant threats to our society. The recent cyber-attacks on both SolarWinds and Microsoft illustrate how widespread the potential damage can be to both government and enterprise entities. Wedbush Technology Analyst, Dan Ives, who covers several companies found in the portfolio of the HACK ETF, has called these attacks “a significant ratcheting up” and described this as “a new age for the cyber security world.” He estimates that “federal cyber security budgets could see a 25%+ year over year increase in 2021/2022” to protect against continuously evolving hackers and security threats.
The COVID pandemic and work from home environment has accelerated an already fast-growing shift to the cloud for many companies. Additionally, the 5G rollout and proliferation of Internet of Things related devices has opened up many new avenues of vulnerability. This requires new and innovative technologies to be implemented in order to protect devices, remote workers and sensitive information. A recent PWC survey of 5,050 CEOs around the world showed 47% identify cyber threats as an extreme threat to their growth prospects, up from 33% in 2020.
Cyber security continues to be one of the fastest growing subsets of technology at an estimated 10% CAGR between now and 2027. The shift to the cloud has opened up a further $200 billion growth opportunity that will find its way into the system over the next five years. The HACK ETF is designed to capture the entire ecosystem of cyber security ranging from legacy tools such as firewalls, password protection, and network security to newer tools such as cloud endpoint security and AI/behavior analytics-based network traffic analysis.
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Fund’s prospectus, which may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477), or by visiting www.etfmg.com/HACK. Read the prospectus carefully before investing.
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility. The fund is concentrated in technology-related companies that face intense competition, both domestically and internationally, which may have an adverse effect on profit margins. Such companies may have limited product lines, markets, financial resources or personnel. The products of such companies may face obsolescence due to rapid technological developments, frequent new product introduction, unpredictable changes in growth rates, competition for the services of qualified personnel, and competition from foreign competitors with lower production costs. Technology companies are heavily dependent on patent and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies. Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. The Funds are non-diversified, meaning they may concentrate its assets in fewer individual holdings than a diversified fund. Investments in smaller companies tend to have limited liquidity and greater price volatility than large-capitalization companies. Diversification does not assure a profit or protect against a loss in a declining market. The Fund’s return may not match or achieve a high degree of correlation with the return of the Prime Cyber Defense Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Prime Cyber Defense Index.
ETF Managers Group LLC is the investment adviser to the Fund.
The Fund is distributed by ETFMG Financial LLC. ETF Managers Group LLC and ETFMG Financial LLC are wholly owned subsidiaries of Exchange Traded Managers Group LLC (collectively, “ETFMG”). ETFMG is not affiliated with Prime Indexes.
Alex Gordon is a registered representative of ETFMG Financial LLC.