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Are Space ETFs Worth Exploring?

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What You Need to Know

  • A half-dozen ETFs focus on public companies involved in space exploration and aerospace.
  • None include Jeff Bezos' Blue Origin or Elon Musk's SpaceX because those companies aren't yet public.
  • Of the six, only one, the Ark Space Exploration and Innovation ETF, is fully actively managed.

Space may be the final frontier, but is it a good investment, or even an accessible one?

The rise of companies like Jeff Bezos’ Blue Origin, Elon Musk’s SpaceX and Richard Branson’s Virgin Galactic has piqued investors’ interest. But investors who choose to explore this theme through ETFs should know what they’re really buying.

There are about a half-dozen ETFs that focus on public companies involved in space exploration and aerospace. None of them include shares of Blue Origin or SpaceX, which are privately held.

Richard Branson’s Virgin Galactic is publicly traded, under the SPCE ticker, but it’s not currently among the top 15 holdings of any of the space-linked ETFs described below (Cathie Wood’s Ark Space Exploration and Innovation ETF sold its shares of SPCE earlier this year).

Also, SPCE has gained just 7% year to date, about one-third of the appreciation of the S&P 500 and one-half the gains of the Russell 2000 index.

Another consideration for investors is how space-linked ETFs define their universe, and therefore their investments. The second largest holding in Wood’s Space Exploration and Innovation ETF (ARKX), for example, is the firm’s own 3D Printing ETF, and the fund also includes companies like Netflix and Deere, known for the tractors it manufactures.

Asked about these last two holdings on CNBC in May, Wood said “the real money-making opportunity is not space tourism [but] mobile connectivity,” which uses satellites from companies like SpaceX to connect the unconnected masses to the internet, enabling them to access Netflix.

Deere will benefit from drones and weather satellites that make farming more efficient, said Wood.

“ARKX holds many companies not specifically tied to space/defense,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA.

We’ve compiled a list of space-linked ETFs, including those that fall under the label of aerospace and defense because of the overlap between the two investment areas, and include some vital information for investors.

Most of the funds are non-diversified. The performance data is based on the market close on Aug. 26, and the fund descriptions are largely based on Morningstar’s fund analyses.

(Image: Adobe Stock)

Ark Space Exploration and Innovation ETF (ARKX)

Assets under management: $672 million

Expenses: 0.75%

Inception date: March 30, 2021

Actively managed

Performance: +0.7% since inception

Top holdings: Trimble, Ark 3D Printing ETF, Kratos Defense & Security

The fund invests at least 80% of its assets in domestic and foreign equity securities of companies engaged in space exploration and innovation, including companies that lead, enable or benefit from technologically enabled products and/or services that occur beyond the surface of the earth.

These include satellite and launch vehicle companies; companies involved in 3D printing, artificial intelligence and robotics; and companies that benefit from aerospace activities including agriculture, global positioning systems and drone manufacturers.

(Image: Adobe Stock)

Procure Space ETF (UFO)

Assets under management: $124.5 million

Expenses: 0.75%

Inception date: April 11, 2019

Index: tracks the S-Network Space Index

Performance: +17.16% year-to-date

Top holdings: Garmin Ltd., Trimble, DISH Network Corp., Class A

The fund invests at least 80% of net assets in companies of the underlying index that receive at least 50% of their revenues or profits from space-related businesses. The index is an equity benchmark for a globally traded portfolio of companies engaged in space-related businesses such as satellite technology.

Communication services and technology are the top two sectors for investments.

(Image: Adobe Stock)

SPDR Kensho Final Frontiers ETF (ROKT)

Assets under management: $21.4 million

Expenses: 0.45%

Inception date: Oct. 22, 2018

Index: tracks the S&P Kensho Final Frontiers Index

Performance: 5.84% YTD

Top holdings: Teledyne Technologies, L3Harris Technologies, Iridium Communications (the latter two companies are among the top holdings of ARKX)

The fund generally invests at least 80% of total assets in securities that make up the index, which includes companies whose products and services are driving innovation in deep space and deep sea exploration. Technology and communication are its most popular sectors.

(Image: Adobe Stock)

iShares U.S. Aerospace and Defense ETF (ITA)

Assets under management: $2.9 billion

Expenses: 0.42%

Inception date: May 1, 2006

Index: tracks the Dow Jones U.S. Select Aerospace & Defense Index

Performance: 11.72% YTD

Top holdings: Raytheon Technologies Corp, Boeing, Lockheed Martin (Teledyne Technologies and L3 Harris Technologies are its fourth and fifth largest holdings.)

The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. Companies include manufacturers, assemblers and distributors of aircraft and aircraft parts.

Industrials and technology are the two primary sectors for this ETF.

(Image: Adobe Stock)

SPDR S&P Aerospace & Defense ETF (XAR)

Assets under management: $1.3 billion

Expenses: 0.351%

Inception date: Sept. 28, 2011

Index: tracks the S&P Aerospace & Defense Select Industry Index, which is equally weighted

Performance: +6.48% YTD

Top holdings: Raytheon Technologies, Boeing, Dow Jones U.S. Select Aero Defense Index Swap, Lockheed Martin

The ETF generally invests at least 80% of its total assets in the securities comprising the index, which is equally weighted unlike the Dow Jones U.S. Select Aerospace & Defense Index, which is market-weighted.

The portfolio contains 34 stocks but has less than 40% of its assets concentrated in its top 10 holdings versus a 70.1% average for its peers, according to Morningstar. The fund also overweights technology stocks by 4.3% compared with the category average.

Moon and earth in space (Image: Adobe Stock)

Direxion Daily Aerospace and Defense Bull 3X shares (DFEN)

Assets under management: $332.6 million

Expenses: 1.01%

Inception date: May 3, 2017

Index (leveraged): tracks three times the performance of the Dow Jones U.S. Select Aerospace & Defense Index

Performance: 26.05% YTD

Top holdings: Raytheon Technologies, Boeing, Dow Jones U.S. Select Aero Defense Index Swap, Lockheed Martin

The ETF seeks three times the return of the Dow Jones U.S. Select Aerospace & Defense Index, before fees and expenses, for a single day. The aerospace companies include manufacturers, assemblers and distributors of aircraft and aircraft parts, and the defense companies include producers of components and equipment for the defense industry, such as military aircraft, radar equipment and weapons.