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Selective Thematic Funds

Migdal Cybersecurity Fund

(this newsletter is destined for professional clients only)
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The AI Disruption – An Opportunity for the Cybersecurity Sector

Over the past several months, the software sector has undergone a meaningful transformation as artificial intelligence shifts from being a product feature to becoming foundational infrastructure. This transition is creating visible turbulence across multiple software categories, reshaping product roadmaps, competitive dynamics, pricing structures, and customer expectations.
As with previous platform shifts, the impact is unlikely to be evenly distributed. In our view, this environment will clearly differentiate between winners and losers:
  • Winners (“AI adaptors”) will be companies that integrate AI into their products in a defensible, measurable, and economically rational manner—enhancing customer outcomes while preserving margins and competitive differentiation.
  • Losers are likely to be those with limited AI strategy, weak data advantages, or business models vulnerable to AI-native alternatives capable of delivering similar functionality faster, more efficiently, and at lower cost.
 
In recent weeks, we have discussed with our advisory board the broader disruption across the software sector and the specific implications of emerging solutions such as Claude Code Security for the cybersecurity landscape.
The cybersecurity sector is diversified across multiple solution categories and is among the most natural adopters of AI technologies. Core security layers—such as DDoS protection, cloud security, and firewalls—are unlikely to be replaced by fully autonomous AI systems. Instead, these solutions are being strengthened by AI capabilities. Other domains, including anomaly detection and security operations centers (SOC), can be significantly enhanced through AI-driven automation and intelligence.
At the same time, the emergence of AI agents and increasingly autonomous systems introduces new categories of cyber risk. These developments are expected to expand the overall threat landscape and drive increased demand for advanced cybersecurity tools.
Cybersecurity vendors, particularly those that adapt quickly can benefit from multiple layers of AI-driven growth:
  1. New threats require new defenses. AI-enabled phishing, automated vulnerability discovery, and more sophisticated social engineering techniques are raising the baseline threat level. Historically, security spending increases in response to elevated risk
  2. AI systems themselves must be secured. As organizations deploy AI models and AI-powered workflows, they face new challenges such as data leakage, prompt manipulation, insecure integrations, and governance gaps. This is driving demand for new security capabilities while expanding existing categories.
  3. Security is becoming more embedded and continuous. AI is pushing security “left” into development processes and “right” into real-time operational environments. This evolution expands the addressable market for vendors that provide integrated visibility and policy enforcement across code, cloud, identity, endpoints, and data
  4. Cybersecurity companies are natural AI adopters. Security is inherently data-intensive, generating high-frequency signals across logs, identities, and behavioral patterns. This makes it well suited for AI applications that improve detection accuracy, triage efficiency, and automated response—delivering measurable value to customers.
 
In light of these structural dynamics, we expect sustained growth in AI-driven security solutions. We believe the current market fluctuations present an opportunity, and we are dynamically allocating between positions to reflect the evolving landscape.
We remain available for further discussion and questions.
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WHAT ARE THE RISKS?
Complete information on the risks of an investment in the fund can be found in “Section IV. the SICAV’s objectives and related risks" of the prospectus.

  • FX risk: Currency of the share class may be different than the currency of residence of the investor.
  • Liquidity risk: the Fund will invest in Transferable Securities of smaller companies which may be less liquid.
  • Counterparty risk: the Fund will invest in OTC derivatives for investment and hedging purposes.
  • Operational risk: the Fund is subject to risks through operational or human error. The management company is monitored by independent internal and external auditors, as well as by the regulators.
  • Risks from the use of derivatives: the Fund will invest on an ancillary basis in financial derivatives.
  • Risks related to leverage: financial derivative instruments can introduce leverage risks and lead to volatility.
  • Risks related to investment in currencies: The Fund’s investments may be acquired directly or indirectly in other national currencies than its
  • reference Currency: This can have a negative impact on the Fund depending on volatility in currency markets.

This Report is provided for information purposes only, and the data contained in the report may be subject to verification or amendment. The commentary contained in this Report is the opinion of the Investment Manager; it is not investment advice and is not a statement of facts. Recipients of this Report should obtain their own professional advice, as appropriate, before buying, selling, subscribing for, or otherwise investing in any financial instruments. This Report contains past performance data. Past performance is not a reliable indicator of future results. No assurance is or can be given that the Fund’s investment objective will be achieved. Additional portfolio information is available on request; in order to obtain this, investors will be required to sign a Non-Disclosure Agreement. This Report is a confidential communication to, and solely for the use of, the persons to whom it is distributed to by Migdal Global Growth Ltd. (the “Fund Advisor”). No recipient of this Report may distribute this Report or otherwise disclose its contents, unless required by applicable laws, or with the Fund Advisor’s express permission. No representation or warranty is made, whether express or implied, by the Fund Advisor, the Investment Manager, the Fund, or their Directors or employees, as to the accuracy or completeness of the information provided. To the fullest extent permitted by law the Fund Advisor, the Investment Manager and the Fund shall not be liable for any loss or damage suffered by any person as a result of the receipt of this Report. This material is neither an offer to sell, nor a solicitation of any offer to buy, an interest in the Fund. Any such offer, if made, would be made only by way of the offering documents of the Fund and only in jurisdictions in which such an offer would be lawful. Any investment in the Fund is speculative and involves a substantial degree of risk. An investor in the Fund could lose all or a substantial amount of its investment. The distribution of this Report may be further restricted by law. No action has been or will be taken by the Fund Advisor to permit the possession or distribution of this Report in any jurisdiction where action for that purpose may be required. Accordingly, this Report may not be used in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons to whom this Report is communicated should inform themselves about and observe any such restrictions. Source and Copyright: Citywire. The Selective Thematic Funds – Migdal CyberSecurity G USD Fund was ranked number 1 on a total return basis over 1 year by Citywire, to the period January 2019. Morningstar: The ranking was as of January 2019. out of 468 Funds in EAA Fund Sector Equity Technology Morningstar Category. The Placement of particular Fund in a ranking, with 1 being the highest percentile and 100 the lowest, of its peers (i.e. Morningstar Category) for a specific datapoint. Investment in the Fund concerns the acquisition of shares in the Fund, and not in the underlying assets in which the Fund invests as these assets are owned by the Fund. Funds Avenue S.A. may decide to terminate the arrangements made for the marketing of the Fund in all or a particular country. This material is a marketing communication and is provided for informational purposes only. It does not constitute investment research, investment advice, or a recommendation to buy or sell any financial instruments, nor does it constitute a binding obligation. Please refer to the Prospectus of Selective Thematic Funds and to the Key Information Document (KID) before making any final investment decisions. Past performance is not a reliable indicator of future results. Any figures shown refer to past performance and should not be relied upon as an indicator of future performance. Returns are shown in USD. The value of investments and any returns may increase or decrease as a result of currency fluctuations when converted into another currency due to changes in exchange rates.The Fund is actively managed and not in a reference to a benchmark.The figures shown are gross of commissions, fees, and any other charges. Returns would be lower once these costs are deducted. The Prospectus and the Key Information Document, in English and free of charge, are available at https://fundsavenue.com/. The Summary of Investor Rights is available in English Funds-Avenue-Investor-Rights.pdf.”