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Why Cybersecurity Could be a Smarter Way to Invest in Technology in 2023

Horizons ETFs

2022 was a difficult year for technology companies and the prospect of volatile market conditions continuing into 2023 could continue to challenge technology investors.

While it may be a ‘long winter’ for many technology-focused industries, could the cybersecurity sector potentially be a smarter way to get technology exposure?

The global digital economy is expected to reach $25 trillion1 within the next five years, but the added convenience and growth opportunities offered by doubling down on the digital world carry significant risk.

Increased digitization, substantial growth in artificial intelligence (AI), the Internet for Things (IoT), and cloud computing have escalated the risks of inadequate cybersecurity from leaking passwords to matters of national security. Year-over-year, 28% more cyberattacks occurred in Q3 2022 than in Q3 2021.2

For the most part, cybersecurity infrastructure has lagged behind advancements, leaving large gaps in protection from the consumer level to the top of corporations. This is costing tens of billions of dollars and, at its current growth rate, it will cost more than 10 trillion dollars of damage by 2025.3

As governments and large companies prepare themselves to address the growth of cyberattacks and warfare, the forecasted trajectory of the cybersecurity sector presents an attractive long-term investment profile for investors looking for an industry with potentially stable upside growth.

Cybersecurity Related Quick Facts

What is influencing cybersecurity growth?

The more we have integrated technology into even more mundane aspects of our life, the more at risk we are to cyberattacks. As technological development leans into automation, devices are built to communicate with one another to complete tasks that humans no longer think about (like remembering passwords, locking and unlocking doors, and turning lights on and off. However, as these lines of interaction in the ecosystem of technology reach further, the opportunities for cybercriminals to exploit them are increasing.

Cyberattacks can be overwhelmingly costly, impact company reputability, and compromise the sensitive data of individuals. As at November 29, 2022, according to Statista, in the third quarter of 2022, approximately 15 million data records were exposed worldwide through data breaches10 — a growth of 37% compared to the previous quarter of the same year.

Key Areas of Potential Growth


The sheer speed of global digitization has led to cracks forming in information-sharing infrastructure. When the issue reaches government organizations, the stakes can become even graver, including limiting access to healthcare and hospital resources 12. IBM reports that  the average data breach is estimated to cost USD 9.44 million in the United States and USD 4.35 million globally in 2022, a growth of 11.9% since 2015. 13

Cloud access, from a work computer to a personal computer or phone, can also pose significant security risks for corporations. Consequently, demand for cloud-based threat detection solutions is anticipated to see significant growth in the coming years. Market predictions for 2023 anticipate 26.6% growth 14 among cloud access security brokers and cloud workload connection platform protection.15

Solutions development is top of mind for significant market players 16 like IBM, Palo Alto Networks, Fortinet, and Cisco, who are developing AI-based software products to help reduce the frequency of mass breaches. There are also large-scale governmental investments in research and development (R&D) from Germany17, France18, India19, Spain20, South Korea21, Italy22, Canada23, and Qatar24 underway.

These ventures aren’t just for the sake of enhancing digital security for the masses – they represent a real investment opportunity. Valued at USD 217.9 billion globally in 2021, the cybersecurity sector is anticipated to grow from USD 240.27 billion in 2022 to 345.4 billion by 202625.

Cyber Warfare and Government-backed Risk Management

Recent cyberattacks against Ukraine and related allies,26, carried out by Russia have illustrated the immediate risks of inadequate cybersecurity infrastructure. These attacks and breaches, carried out either to harm the Ukrainian government or “test” their capabilities of weakening systems, could be a foreshadowing for neighbouring European countries27 and allies with similar infrastructures.

In May 2021, U.S. President Joe Biden signed the executive order, Improving the Nation’s Cybersecurity28. The order offered robust funding for the United States to improve safe connectivity between the government and private sector through the early detection and reduction of cyber threats on Federal systems. The order includes $65 billion in proposed29 spending on IT at civilian agencies in fiscal year (FY) 2023, to deliver critical public services, and keep sensitive data and systems secure.

Subsequently, on October 11, 2022, the U.S. Government announced30 that The State and Local Cybersecurity Grant Program will provide $1 billion in funding to state, local, and territorial (SLT) partners over four years to support SLT systems risks management. In addition, the budget allotted roughly USD 10.9 billion for civilian cybersecurity-related activities – an 11% increase from 2022’s spending proposal.

The U.S. is far from alone in its approach. Globally, approximately USD 150 billion was spent on cybersecurity implementation in 2021, representing an annual growth of 12.4%.31.

Outside of the United States, Israel is the only country that falls within the top three regions for cybersecurity innovation32. Influenced by government-supported initiatives dating back to 2017, and a steep increase in cyberattacks during the COVID-19 pandemic, in 2021 funding for cybersecurity-related businesses grew to USD 8.8 billion33 in the country. In comparison to the broader sector’s growth, the Middle East’s market share is projected34 to grow from USD 20.3 billion in 2022 to 44.7 billion within 5 years, actualizing a CAGR of 17.1%.

Multinational companies like ORACLE, Dell, and IBM all prioritize R&D in Israel35 as a recognized pioneer of innovation, thus contributing to the flow of funding to the region. Yearly, 40% of private global investments36 have been acquired in Israel alone. Their emulated 360-degree approach to cybersecurity investment includes numerous programs that teach cybersecurity in schools and universities37 and provide millions of funding for early start-ups to keep the revolving door of innovation in rotation.

Worldwide Information Security & Risk Management End User Spending by Segment 2023
(Millions of U.S. Dollars)
Market Segment 2021   Spending 2021   Growth (%) 2022  Spending 2022   Growth (%) 2023  Spending 2023  Growth (%)
Application Security 4,963 20.8 6,018 21.3 7,503 24.7
Cloud Security 4,323 36.3 5,276 22 6,688 26.8
Data Privacy 1,140 14.2 1,264 10.8 1,477 16.9
Data Security 3,193 6 3,500 9.6 3,997 14.2
Identity Access Management 15,865 22.3 18,019 13.6 20,746 15.1
Infrastructure Protection 24,109 22.5 27,408 13.7 31,810 16.1
Integrated Risk Management 5,647 15.4 6,221 10.1 7,034 13.1
Network Security Equipment 17,558 12.3 19,076 8.6 20,936 9.7
Other Information Security Software 1,767 26.2 2,032 15 2,305 13.4
Security Services 71,081 9.2 71,684 0.8 76,468 6.7
Consumer Security Software 8,103 13.7 8,659 6.9 9,374 8.3
 TOTAL 157,749.70 14.3 169,156.20 7.2 188,336.20 11.3

Source: Gartner, October 2022

Focus on Leaders:

One differentiating factor between the Cybersecurity industry versus other thematic technology sectors is that the importance of emerging companies is less than scale and capitalization. Since cybersecurity spending would be focused on a core security concern, having an established company with credibility in the sector is of paramount concern. This tends to have revenue growth favouring the larger more established names in the industry. For this reason, the Indxx Cybersecurity NTR Index utilizes a higher market cap than other cybersecurity strategies with a $200 million threshold for inclusion. Constituent securities are also market cap-weighted (although capped at 6% on rebalance), which provides a greater breadth of exposure to the leaders in the sector.

If you’re seeking to include some technology exposure in your portfolio, whether based on long-term conviction or because you believe a tech rebound may be on the horizon, doing so through a cybersecurity ETF could be a smarter way to invest in technology in 2023.

Cybersecurity Sector Market Trends

Following over 430 major transactions in 202138, industry juggernauts continue to push substantial mergers in the fourth quarter (Q4) of 2022. Cybersecurity-related mergers and acquisitions saw substantial growth trends at the top of Q4 2022, after a brief slow in Q3 2022. Within the first month of the quarter, USD 6.90 billion was exchanged in acquisition deals39. The majority of these were carried out by large-sized companies located in North America and Europe. Most notably Thoma Bravo LP closed the USD 3.01 billion purchase of identity security platform, Ping Identity Holding Corp.40

It is highly unlikely for this trend to slow as 46% of CEOs anticipate involving Chief Information Security Officers (CISOs) in the race to reduce risk. Globally, CISOs are calling for heavy R&D in security automation to build the lacking in-house infrastructure to address security targets. As a result, worldwide, spending on security and risk management is poised to grow 11.3% in 2023 to over USD 188.3 billion.41

The Investment Case for Cybersecurity: HBUG

Cybersecurity is a sub-industry of the technology sector that seems to have real fundamental drivers of growth. Regardless of the valuations of technology companies, there will continue to be a need for firms in all sectors of the economy to invest in cybersecurity.

The Horizons GX Cybersecurity Index ETF (HBUG) provides global exposure to global, publicly listed companies that stand to potentially benefit from the increased adoption of cybersecurity technology, such as those whose principal business is generally engaged in the development and management of security protocols that prevent intrusion and attacks to systems, networks, applications, computers, and mobile devices.

Launched in December 2021, HBUG seeks to replicate, to the extent possible and net of expenses, the performance of the Indxx Cybersecurity Index by investing primarily in the Global X Cybersecurity ETF, which trades on the NASDAQ stock exchange under the ticker BUG. HBUG seeks to hedge any U.S. dollar portfolio exposure back to the Canadian dollar at all times.


Why Consider HBUG and Cybersecurity in 2023?

Overall, 2022 was a difficult year for the broader technology sector. Many technology companies – from blue chip incumbents to newer entrants – saw double-digit losses in market capitalization, alongside the tech-heavy NASDAQ index. High valuations and several macroeconomic factors, including rising interest rates and the ongoing war in Ukraine have contributed to the challenging landscape for technology companies and could continue to loom over the sector into 2023.

The cybersecurity sector, as represented by the Indxx Cybersecurity Index, the underlying index for both HBUG and BUG, returned -33.23% in 2022, as at December 31, 2022, underperforming the U.S. technology sector, as represented by the Technology Select Sector Total Return Index (IXXTR), however, it outperformed other key thematic technology sector indices, such as the robotics and A.I. sector, as represented by the Indxx Global Robotics & Artificial Intelligence Thematic Index and Cloud Computing as represented by the Indxx Cloud Computing Index.

Standard Performance Data
Bloomberg Ticker Name 1m 3m 6m YTD 1 yr 3yr 5yr 10yr Since Common Inception (12/01/2021) Since Inception Inception Date Currency
IXTTR Index Technology Select Sector Total Return Index -8.25% 5.14% -1.54% -27.64% -27.64% 11.95% -22.73% 12.26% -22.73% 12.26% 02-Jul-03 USD
IBUGT INDEX Indxx Cybersecurity NTR Index -7.64% -11.91% -15.33% -33.23% -33.23% 9.17% -28.24% 10.97% 13-Sep-19 USD
HBUG CN Equity Horizons GX Cybersecurity Index ETF -8.53% -12.98% -16.82% -35.43% -35.43% -30.20% -30.13% 01-Dec-21 CAD
ICLOUT Index Indxx Global Cloud Computing Index (GTR) -4.28% 0.80% -2.39% -39.07% -39.07% 1.90% -36.84% 12.15% 05-Jan-18 USD
IBOTZ INDEX Indxx Global Robotics & Artificial Intelligence Thematic Index -2.18% 13.81% 1.67% -42.10% -42.10% -1.13% -39.55% 10.05% -39.55% 10.05% 30-Jun-10 USD  

*Since Inception Return.
**Since Common Inception Return, December 1, 2021
(Source: Bloomberg, as at December 31, 2022)

The indicated ETF rates of return are the historical annual compounded total returns, including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Additionally, index returns do not take into account management, operating or trading expenses that may be incurred in replicating the index. The rates of return above are not indicative of future returns. ETFs are not guaranteed, their values change frequently, and past performance may not be repeated. The indices are not directly investible. Only the returns for periods of one year or greater are annualized returns.

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Horizons ETFs Management (Canada) Inc.

Horizons ETFs Management (Canada) Inc. is an innovative financial services company and offers one of the largest suites of exchange traded funds in Canada. The Horizons ETFs product family includes a broadly diversified range of solutions for investors of all experience levels to meet their investment objectives in a variety of market conditions.

1United Nations (2022). E-Government (Web version). Retrieved from
2Checkpoint (2022, October 26). Third quarter of 2022 reveals increase in cyberattacks. Retrieved from
3McKinsey & Company (n.d.). New survey reveals $2 trillion dollar market opportunity for cybersecurity technology and service providers. Retrieved from
4Checkpoint (2022, October 26). Third quarter of 2022 reveals increase in cyberattacks. Retrieved from
5Checkpoint (2022, October 26). Third quarter of 2022 reveals increase in cyberattacks. Retrieved from
6 Statista (n.d.). Number of data breaches worldwide. Retrieved from,compared%20to%20the%20previous%20quarter
7 IBM (n.d.). Data breach report. Retrieved from
8 IBM (n.d.). Data breach report. Retrieved from
9 McKinsey & Company (n.d.). New survey reveals $2 trillion dollar market opportunity for cybersecurity technology and service providers. Retrieved from
10 Statista (n.d.). Number of data breaches worldwide. Retrieved from,compared%20to%20the%20previous%20quarter
11 Statista. (2022). Businesses ransomware attack rate. Retrieved from
12 IT World Canada (n.d.). Toronto’s Hospital for Sick Children dealing with a cybersecurity incident. Retrieved from
13 IBM (n.d.). Data breach report. Retrieved from
14 Gartner (2022, October 13). Gartner identifies three factors influencing growth in the global cybersecurity market. Retrieved from
15 Gartner (2022, October 13). Gartner identifies three factors influencing growth in the global cybersecurity market. Retrieved from
16 Fortune Business Insights (n.d.). Cybersecurity market. Retrieved from
17 Mordor Intelligence (n.d.). Germany cybersecurity market. Retrieved from’s,and%20solutions%20to%20cyber%2Dattacks.
18 BPI France (2022, November 18). Cybersecurity: BPI France supports French companies in the fight against cybercrime. Retrieved from,create%2037%2C000%20jobs%20by%202025.
19 (n.d.). India cybersecurity market. Retrieved from’s%20total%20enterprise%20information%20security,Council%20of%20India%20(DSCI).
20 Reuters (n.d.). Spain tech funding. Retrieved from
21 International Telecommunication Union (n.d.). National Cybersecurity Strategy: South Korea. Retrieved from
22 Decode39 (n.d.). Italy national cybersecurity strategy. Retrieved from
23 Innovation, Science and Economic Development Canada (2021, May). Government of Canada investing to position Canada as a global leader in cybersecurity. Retrieved from
24 Yonhap News Agency (2021, February 18). Qatar state fund invests in Israeli-founded cybersecurity start-up. Retrieved from
25 Statista. (n.d.). Worldwide security-as-a-service market size. Retrieved from
26Bloomberg (2022, December 3). Russian cyberattacks against Ukraine likely, Microsoft says. Retrieved from
27Harvard Business Review (2022, March). What Russia’s ongoing cyberattacks in Ukraine suggest about the future of cyber warfare. Retrieved from
28 The White House (2021, May 12). Executive order on improving the nation’s cybersecurity. Retrieved from
29 The White House (2021, May 12). Executive order on improving the nation’s cybersecurity. Retrieved from
30 The White House (2022, October 11). Fact sheet: Biden-Harris administration delivers on strengthening America’s cybersecurity. Retrieved from
31McKinsey & Company (n.d.). New survey reveals $2 trillion dollar market opportunity for cybersecurity technology and service providers. Retrieved from
32Nasdaq (n.d.). Cybersecurity in Israel: Fortifying digital defenses amid elevated risks. Retrieved from,small%20size%20of%20the%20country.
33The Times of Israel (n.d.). Israel cybersecurity firms raised record $8.8b in 2021, exports reached $11b. Retrieved from
34 GlobeNewswire (2022, April 25). The Middle East cybersecurity market size is projected to grow from USD 20.3 billion in 2022 to USD 44.7 billion by 2027 at a Compound Annual Growth Rate (CAGR) of 17.1%. Retrieved from
35Jigsaw Academy (n.d.). Why the Israelis lead the world in cyber security expertise. Retrieved from
36Government of Israel (n.d.). Cyber industry. Retrieved from
37Jigsaw Academy (n.d.). Why the Israelis lead the world in cybersecurity expertise. Retrieved from
38SecurityWeek (n.d.). SecurityWeek study: Over 430 cybersecurity mergers, and acquisitions announced in 2021. Retrieved from
39S&P Global (n.d.). Cybersecurity M&A bustling again in Q4 after a bleak Q3. Retrieved from
40Thoma Bravo (n.d.). Thoma Bravo completes acquisition of Ping Identity. Retrieved from https://www.thomabravo
41 Gartner (2022, October 13). Gartner identifies three factors influencing growth in the cybersecurity market. Retrieved from

Commissions, management fees and expenses all may be associated with an investment in the Horizons GX Cybersecurity Index ETF (“HBUG” or the “ETF”) managed by Horizons ETFs Management (Canada) Inc. The ETF is not guaranteed, its value(s) change(s) frequently and past performance may not be repeated. The prospectus contains important detailed information about the ETF. Please read the prospectus before investing.

Indxx is a service mark of Indxx, LLC (“Indxx”) and may be licensed for use for certain purposes by the Manager. The ETF is not sponsored, endorsed, sold or promoted by Indxx. Indxx makes no representation or warranty, express or implied, to the owners of the ETF or any member of the public regarding the advisability of investing in securities generally or in the ETF particularly. Indxx has no obligation to take the needs of the Manager or the Unitholders of the ETF into consideration in determining, composing or calculating the Indxx Cybersecurity Index. Indxx is not responsible for and has not participated in the determination of the timing, amount or pricing of the Units to be issued or in the determination or calculation of the equation by which the Units are to be converted into cash. Indxx has no obligation or liability in connection with the administration, marketing or trading of the ETF.

Certain statements may constitute a forward-looking statement, including those identified by the expression “expect” and similar expressions (including grammatical variations thereof). The forward-looking statements are not historical facts but reflect the author’s current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. These and other factors should be considered carefully and readers should not place undue reliance on such forward-looking statements. These forward-looking statements are made as of the date hereof and the authors do not undertake to update any forward-looking statement that is contained herein, whether as a result of new information, future events, or otherwise unless required by applicable law.

This communication is intended for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to purchase exchange traded products (the “Horizons Exchange Traded Products”) managed by Horizons ETFs Management (Canada) Inc. and is not, and should not be construed as, investment, tax, legal or accounting advice, and should not be relied upon in that regard. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. These investments may not be suitable to the circumstances of an investor.

All comments, opinions and views expressed are generally based on information available as of the date of publication and should not be considered as advice to purchase or to sell mentioned securities. Before making any investment decision, please consult your investment advisor or advisors.

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