ETFs can often seem like a new frontier in investing, perhaps no more so than when they’re investing in the final frontier: space. Space ETFs lean into ETFs’ ability to craft thematic exposures, with few ideas so thematic as space.
The “space” presents boundless opportunities, but even in just the near-orbit space, the recent situation in which two U.S. astronauts have been stranded on the International Space Station highlights a growing need for more infrastructure in low orbit.
See more: With 529 Plans in Demand, Try an ETF Strategy
Of course, the defense industry is a leading player in developing options in orbit of the Earth. The Procure Space ETF (UFO ) leans into this as a first mover in the space-ETF area when it comes to space and defense. The fund looks at areas including, but not limited to, rocket and satellite manufacturing and deployment and space-based imagery and intelligence services.
UFO and Space ETFs
UFO, which charges 75 basis points, divides its holdings into two areas. The first focuses on nondiversified firms that derive at least 50% but most often 100% of revenues from space. The second includes more diversified firms that still focus on space. The nondiversified category comprises about 80% of the space ETF’s weight, with the rest for the more diversified options.
The strategy hit its five-year ETF milestone earlier this year. Within the last few months, the fund has seen its performance spike, beating some notable averages. UFO has returned 14.1% over the last three months. That has outperformed both its ETF Database Category and FactSet Segment Averages over that period.
While the strategy definitely sits in the truly thematic space, UFO could be poised to ride that momentum forward. Space ETFs overall could benefit from both growing defense spending on space and rate cuts boosting tech. For those looking at space ETFs, UFO may be one key option to watch.
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