An ETF solely focused on global defence companies has been raking in the cash as the war in Ukraine drags into its third year and hostilities between Israel and Iran ramp up.
Van Eck’s Defense UCITS [DFNS] passed US$550 million in funds this week a year after its launch, with its manager saying that the Ukraine situation has prompted a re-evaluation of defence needs across Europe.
Investing in companies described as pure plays or with at least 50% revenues in defence industries, DFNS has risen 47% since its launch a year ago.
“The rapid growth of our ETF illustrates the importance of defence nowadays for investors”, said Martijn Rozemuller, chief executive of VanEck Europe.
“Traditionally, the defence industry has been a rather sensitive topic, especially in Europe.
“However, the outbreak of war in Ukraine and other areas of tension and conflict around the world have changed the way many people view defence policy.”
“For example, many governments in Western European countries, which have repeatedly undershot NATO's two per cent target for military spending in the past, have announced increased investment in defence infrastructure and military stocks in order to meet the two per cent target in the future and ensure their own defence capabilities.
“Companies in the security and arms industries could benefit from this development in the long term in the coming years,” Rozemuller said.
Products made by companies eligible for inclusion range from defence equipment, aerospace technology, communications systems and services, satellite technology, drones, software and more.
Companies that generate revenue from controversial weapons or have demonstrably failed to comply with established standards are excluded, Van Eck added.