Investor interest in the space exploration sector goes beyond launching rockets. While much of the media’s focus centers on launches (and lately, a forthcoming SpaceX IPO), smart money is moving into the foundational infrastructure layers required for efficient operation while in orbit. Poised to capture this sector tailwind is the Procure Space ETF (UFO ), which tracks the S-Network Space Index.
The index will be re-branded to the VettaFi Space Index on May 15. UFO is the market’s first pure-play exchange-traded fund (ETF) dedicated to companies generating revenue from the space industry. Coming off a strong April, it’s well positioned to continue on its orbit of an overall strong year.
“UFO has had a great run from a performance and a flows standpoint,” said TMX VettaFi Head of Research Todd Rosenbluth when speaking about the fund on Yahoo Finance.
Strong April, Strong Year
After a volatile March, markets returned to positive form during April with UFO following in tow. The fund was up 12% last month, adding to the strong year-to-date performance run its had so far.
That said, UFO is up over 30% year-to-date through the end of April. This performance was over six times better than the broader market S&P 500.
Notable April Performers
UFO’s double-digit total return in April was propelled by stellar gains from its largest holdings. Within the fund’s top 10 constituents, specialized connectivity and launch providers were strong performers as indicated below:
- ViaSat: Led the top 10 holdings with a blistering 46% gain in April, driven by expanding defense contracts and aviation connectivity milestones.
- Rocket Lab: Skyrocketed 37% last month as the firm solidifies its position as the premier commercial alternative for small-to-medium satellite deployments.
- Iridium Communications: This satellite communications company gained 26% in April, proving the defensive resilience and robust cash-flow profile of established orbital cross-linked architectures.
These targeted gains triggered a fresh wave of investor interest as seen in net flows for the month. April, in particular, saw an influx of net flows to the tune of over $321 million.
The April flows are almost 65% of the close to $500 million net flows the fund has seen so far this year.
A Momentus Occasion
Though not in the Top 10 holdings, one of the names to watch is Momentus. As mentioned, while launches garner the most attention in the headlines, UFO’s structural value is exposure to the entire space ecosystem. That said, its high conviction holdings (53 as of April 5) include critical niche operators further down on the capitalization spectrum like Momentus.
While SpaceX and Rocket Lab handle the heavy lifting of getting payloads off the Earth, Momentus is pioneering the “last-mile delivery” layer of orbit. At the center of its business model is an Orbital Transfer Vehicle (OTV) called Vigoride. Once a large rocket drops small satellites off in a general orbit, Vigoride acts as a space tugboat. It actively maneuvers payloads into their exact operational positions.
The demand for precise orbital placement is rising, but it’s also creating an operational bottleneck. Momentus is scaling to turn this bottleneck into a commercial moat. To achieve this, the company is expanding into an array of in-space services that include:
- On-orbit servicing: Repairing, refueling, and repositioning legacy satellites.
- Hosted payloads: Allowing firms to rent space on existing platforms rather than building independent machinery from scratch.
- In-space manufacturing support: Preparing for the microgravity production trades of the next decade.
The UFO Wrapper
With the entire space exploration sector encapsulated in a high-conviction portfolio, UFO ensures that investors are exposed to companies like Momentus along with ViaSat and Rocket Lab. This also speaks to the ease of ETFs providing broad-based exposure to an entire sector for capturing upside in companies of all sizes.
“I think the benefits of ETFs ring true in that people will get exposure to small- and mid-cap companies,” Rosenbluth added.
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VettaFi LLC (“VettaFi”) is the index provider for UFO, for which it receives an index licensing fee. However, UFO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of UFO.
