Global Turbulence Spurs Interest in VanEck’s Defence ETF

Check about the global turbulence that spurred interest in VanEck's defence ETF

On Monday, fund manager VanEck stated that a defense industry-focused exchange-traded fund (ETF) generated $550 million in net assets in the first year. This demonstrates how investors' attention has been drawn to the defence industry by the ongoing worldwide conflict.

VanEck, a New York-based firm, began trading its defense UCITS ETF in late March 2023. It has gained about 20% year-to-date in 2024. The VanEck Defense UCITS ETF has reached about $560 million worth of net assets in the past year.

The Ukraine war and the Israel-Hamas conflict, which has drawn in Iran as well, have prompted many governments to urge NATO allies to increase their military budgets. In April, UK Foreign Secretary Cameron called on NATO allies to "increase defense spending and production in support of Ukraine against Russia." In response, Israel revised its budget to include more defense spending.

The defence industry has traditionally been a highly emotive subject, particularly in Europe. Still, the start of the war in Ukraine, as well as other geopolitical tensions and conflicts around the globe, has changed the perception of defence policy among many people, according to VanEck Europe's chief executive officer, Martijn Rozemuller.

The ETF's most prominent positions are French defence stocks Thales and Safran, both of which will open new tabs, as well as Italian defence company Leonardo and US defence technology firm Booz Allen Hamilton, both of which will also open new tabs.

Earlier this month, strategists at Goldman Sachs said they were "not recommending European defence stocks," despite the sector's recent performance, which has gained 27% year-to-date in 2024, compared to a 5% rise in the broader STOXX Europe index.

APICIL Asset Management's fund manager, Gregoire Laverne, believes defence stocks remain one of the best long-term investments, given the current global political climate. "Defence remains a key component of fund managers' portfolios," Laverne said, noting that governments in Europe and around the world are continuing to increase military spending.