US-based investment manager VanEck has launched Europe’s first ETF focused on the defence industry.
The VanEck Defense Ucits ETF launched on the London Stock Exchange, and Deutsche Borse provides exposure to the global defence sector through defence technology companies and cybersecurity companies, as well as companies providing other technology products to the defence industry.
The fund will invest in pure-play businesses which derive at least 50% of revenues from the defence sector. At launch, its top ten holdings include the French multi-national groups Thales and Safran and the controversial data group Palantir Technologies, founded by billionaire Peter Thiel.
Existing members of the ETF all have a market capitalisation of $750 million or higher, while future candidates require a market cap of $1 billion or more and minimum trading volumes.
The fund launch aims to benefit from renewed focus in Europe on defence spending and technology in the wake of the Russian invasion of Ukraine in 2022.
Martijn Rozemuller, chief executive of VanEck Europe, acknowledged that a pure defence ETF marked a break with recent nervousness among European investors over the defence industry.
“Due to the Russian invasion of Ukraine, tensions in Asia, and global uncertainty, security and defence are back on investors’ minds after being shunned for several years,” said Rozemuller.
The fund does apply controversy screening to its investments and will exclude companies involved in anti-personnel mines, cluster weapons, biological and chemical weapons and those that use depleted uranium and white phosphorous.
Investments in nuclear weapons may be included if they are within the international Non-Proliferation Treaty.
The Market Vector Global Defense Industry Index (MVDEFTR), which tracks the performance of global defence firms, has risen 3.57% over the last year and 9.33% rise in the year to date.
With the ETF demand growing within Europe, more firms have been launching products into the region.
VanEck isn’t the only US name targeting this growing market.
In February, it was reported US giant Morgan Stanley was planning to create a global, cross-asset-class ETF platform with which to enter Europe.
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