The FTSE 100 index looks like it’s going to end 2026 in positive territory. Year to date, it’s up 9%, putting the Footsie on course for its sixth consecutive year of gains.
Impressive stuff, for sure. However, there are some exchange-traded funds (ETFs) that have blown the blue-chip index out of the water.
One is L&G Cyber Security ETF (LSE:ISPY). So far in 2026, this Legal & General fund with the cool ticker is up about 37%.
Let’s take a closer look at this thematic ETF to see why it’s crushing the FTSE 100.
Surging stocks
As a reminder, ETFs offer investors low-cost portfolio exposure to many different growth themes, including semiconductors, healthcare innovation, emerging markets, and more.
The theme of the L&G Cyber Security ETF is on the tin. Many stocks in this sector are up significantly this year, explaining why the ETF is easily outperforming the FTSE 100 (which has very little pure-play cybersecurity exposure).
Top holdings include Palo Alto Networks (up 69% year to date), CrowdStrike (+59%), Fortinet (+90%), and Cisco Systems (+49%). The largest holding today though is BlackBerry, which has rocketed 110% in 2026.
That last name is a blast from the past, reminding me of the BlackBerry Messengers. But the Canadian firm exited the phone business years ago, pivoting wisely into enterprise software, cybersecurity, and Internet of Things operating systems.
Not all holdings have done well, though. Qualys, Rubrik, and Gen Digital have all underperformed the market this year, while Broadcom is down 22% since early June.
But this is the beauty about thematic ETFs — you don’t have to pick the individual winners. As long as the sector outperforms, the returns should take care of themselves.
Skynet vibes
Why have investors turned bullish on cybersecurity? Well, I’m sure most will have read about the challenges rapid AI advancements are posing for the digital safety of businesses and governments worldwide.
Basically, there’s an AI arms race going on, where bad actors are using the technology to devise more sophisticated cyber attacks, while the likes of Palo Alto Networks and CrowdStrike are benefitting by selling customers more AI-driven defence capabilities.
In recent days, we’ve learned about an AI agent from OpenAI that went rogue and autonomously hacked a startup’s website. Reading that reminded me of the malicious AI system Skynet from Terminator 2!
Against this backdrop, cybersecurity spending has become non-negotiable.
Worth a look?
Is the ETF still worth considering near an all-time high? Potentially, though it’s far more riskier than it was at the start of the year because valuations in the sector are a lot higher now.
CrowdStrike and Palo Alto, for example, are trading at 147 and 77 times forward earnings, respectively. So these shares appear quite frothy at the moment.
Were tech stocks to have a meltdown at some point, this ETF would suffer, with 97% of its holdings in the tech sector.
On the other hand, AI looks to be a multi-decade supportive trend for the cybersecurity sector. So as a small part of a well-rounded portfolio, the ETF could still do a job (I’m holding onto my shares).
As things stand though, I’m eyeing up other opportunities with any new money I have to invest.
Should you invest £5,000 in L&G Cyber Security ETF right now?
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Ben McPoland owns shares in CrowdStrike, L&G Cyber Security ETF, and Legal & General.
