Over one year after Russia invaded Ukraine, aerospace and defense ETFs are continuing to see strong inflows.
Defense stocks spiked early in 2022 as geopolitical tensions between Russia and Ukraine intensified, prompting investors to look to aerospace and defense ETFs. Since the beginning of the Russia-Ukraine war on February 24 through February 28, 2023, PPA saw $1 billion in net flows, according to ETF Database.
During the first two months of 2023, PPA accreted $91 million in net flows. The consistent strong flows into the fund suggest that the defense industry-focused fund has a long-term role in broader portfolios. Incepted in 2005, PPA has $1.7 billion in assets under management.
The significant flows into PPA were coupled with strong performance in 2022. Last year, PPA returned 9.5% while the S&P 500 declined -18.1%, each on a total return basis. Year-to-date, PPA is up 2.47% and the S&P 500 has climbed 3.69%; however, over a one-month period, PPA is outperforming the S&P 500 by 242 basis points.
PPA tracks the SPADE Defense Index, investing in defense stocks spanning all market caps. These companies are involved in the development, manufacturing, operations, and support of U.S. defense, homeland security, and aerospace operations. The fund and the index are rebalanced and reconstituted quarterly, according to Invesco.
The fund holds 55 defense stocks as of February 28. The top holdings include Boeing Company (BA), Raytheon Technologies Corporation (RTX), Lockheed Martin Co. (LMT), General Dynamics Corporation (GD), Northrop Grumman Corporation (NOC), Honeywell International Inc. (HON), General Electric Company (GE), L3Harris Technologies Inc. (LHX), Axon Enterprise Inc. (AXON), TransDigm Group Incorporated (TDG), and Textron Inc. (TXT), according to VettaFi.
PPA charges a 61 basis point fee.
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