Cybersecurity services are more relevant than ever due to the adoption of interconnected technologies. Jeff Spiegel, our megatrends expert, delves into the new long-term investment opportunities as digitization continues to expand.
Over the past year or more, a shift from the office to remote work drove digitalization more than any previous year. Companies underwent a digital evolution overnight, fighting to stay competitive in the face of the global disruption caused by the COVID-19 pandemic. Among the biggest challenges was ensuring the security of enterprise networks.
Today, hybrid work is here to stay, and cybersecurity is a big consideration for companies’ business plans. In 2020 alone, the demand for new digital products and services increased by 76% and is estimated to grow to 83% by the end of 20211. Online security and digitization issues are already part of companies’ growth plans, opening the door to long-term opportunities for investors.
«The sector’s growth potential is driven by strong technology adoption globally. Global spending on information security and risk management technology is forecast to exceed $150 billion in 20212, up 12% from last year and 50 times more than four years ago«3 – Jeff Spiegel, US Head of BlackRock Megatrend, International and Sector ETFs
The hidden face of technological progress
Digitized companies were more resilient during the pandemic globally, and technology is expected to continue to be a growth driver moving forward. It is estimated that companies using digital tools can expect their profit margins to increase, on average, by 12% to 20% globally4.
However, the adoption of digital technologies has also paved the way for the proliferation of cybercrime. In 2020 alone, malware attacks (malicious software) more than tripled as compared with 2019, and ransomware attacks (the virtual extortion of companies) more than quadrupled5.
Any company, large or small, that uses servers to store information is at risk of cyber-attacks. Thus, the growing demand for cybersecurity services has resulted in a boom of companies offering this type of services.
Fad or trend?
The world is making great leaps and bounds towards a connected reality in both the organizational nature of companies and the habits of their employees. As more systems move to the cloud and rely on global networks, the need to ensure data security and privacy will continue to increase.
«Evidence of the impact of megatrends is all around us, reflected in products, services and movements with profound transformative potential. They are expected to reshape our personal and professional routines for decades to come. Identifying transformative investment themes offers the potential for significant long-term growth.» – Jeff Spiegel, Head of iShares Megatrend and International ETFs for the United States.
Investing in cybersecurity
The struggle to create a safer cyberspace is a global priority. The rise of cybersecurity, cloud security and information technology services companies is an opportunity to take advantage of the changes already materializing over the past year and a half.
«Our megatrend Active and Index Funds are based on BlackRock’s conception of long-term trends that can change the trajectory of the global economy. These powerful transformative forces, from artificial intelligence to genomics to clean energy, are changing societal priorities, driving innovation and redefining business models.» – Jeff Spiegel, US Head of BlackRock Megatrend, International and Sector ETFs
Investing in products nestled under the technological breakthrough megatrend functions as a portfolio diversifier that allows for greater resilience and exposure to long-term returns.
«Megatrend indexes are less constrained in their inclusion criteria than traditional sectors, potentially allowing them to better keep pace with the rapidly changing boundaries of the global economy. This investment approach allows earlier exposure to potentially disruptive companies than conventional indexes, as they are organized around business activities, not growth stages.» – Jeff Spiegel, US Head of BlackRock Megatrend, International and Sector ETFs
iShares megatrends ETFs within the technological breakthrough category provide exposure to companies that are developing technologies in the fields of cybersecurity, as well as to additional components of the megatrend such as digitization, smart infrastructure, telecommuting, automation and robotics.
As a US Offshore Investor, you can access Megatrends through Active and Index Solutions with BlackRock. See our Funds that provide exposure to CyberSecurity:
iShares Digital Security UCITS ETF
iShares Digitalisation UCITS ETF
BBF FinTech Fund
BGF Next Generation Technology Fund
1Gartner. (October 2020). “Encuesta de Gartner de casi 2.000 CIOs revela que las empresas con mejor rendimiento priorizan la innovación digital durante la pandemia”. https://www.gartner.mx/es/sala-de-prensa/comunicados-de-prensa/2020-10-20-encuesta-de-gartner-de-casi-2000-cio-revela-que-las-empresas-con-mejor-rendimiento-priorizan-la-innovacion-digital-durante-la-pandemia
2 Gartner. (May 2021). “Gartner Forecasts Worldwide Security and Risk Management Spending to Exceed $150 Billion in 2021”. https://www.gartner.com/en/newsroom/press-releases/2021-05-17-gartner-forecasts-worldwide-security-and-risk-managem
3 Gartner. (August 2018). “Gartner Forecasts Worldwide Information Security Spending to Exceed $124 Billion in 2019”. https://www.gartner.com/en/newsroom/press-releases/2018-08-15-gartner-forecasts-worldwide-information-security-spending-to-exceed-124-billion-in-2019
4 Boston Consulting Group. “La transformación digital puede aumentar la rentabilidad de las empresas y construir resilencia”. https://www.bcg.com/en-cl/press/26july2020-digital-transformation-can-increase-business-profitability-and-build-resilience
5Deep Instinct, «Pandemic Chaos Releases Malware Disaster: 2020 Cyber Threat Landscape Report,” December 2020.
Disclaimer
In Latin America: this material is for educational purposes only and does not constitute investment advice nor an offer or solicitation to sell or a solicitation of an offer to buy any shares of any Fund (nor shall any such shares be offered or sold to any person) in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction. If any funds are mentioned or inferred to in this material, it is possible that some or all of the funds may not have been registered with the securities regulator of Argentina, Brazil, Chile, Colombia, Mexico, Panama, Peru, Uruguay or any other securities regulator in any Latin American country and thus might not be publicly offered within any such country. The securities regulators of such countries have not confirmed the accuracy of any information contained herein. The provision of investment management and investment advisory services is a regulated activity in Mexico thus is subject to strict rules. For more information on the Investment Advisory Services offered by BlackRock Mexico please refer to the Investment Services Guide available at www.blackrock.com/mx
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