Future of Defence UCITS ETF surpasses $50 million AuM as geopolitical tensions continue to mount

07 February 2024

  • Future of Defence UCITS ETF (NATO) has reached $51.1 million for the first time since its launch in July 2023.
  • The Future of Defence UCITS ETF (NATO) provides exposure to companies providing equipment or cyber defence services to NATO or NATO+ member countries.
  • With geopolitical tensions increasing, governments are committing larger amounts to both physical and cyber defence. NATO members have made renewed efforts to boost their military spending to the alliance’s 2% of GDP spending targets, with several members such as Poland intending to exceed this.
 

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February 2023, London

HANetf, Europe’s first and only independent white-label UCITS ETF and ETC platform , and leading provider of digital asset ETPs, is delighted to announce that the Future of Defence UCITS ETF (NATO) has reached $51.1 million assets under management (AUM) for the first time since its launch in July 2023.

NATO, which tracks the EQM Future of Defence Index, seeks to provide exposure to the global companies generating revenues from NATO and non-NATO (NATO+) ally defence and cyber defence spending.

Investors are increasingly aware of the current tense geopolitical climate, from the ongoing war in Ukraine to the US and China tensions. In 2023, HANetf conducted a survey wealth managers found that 78% have placed increased importance on geopolitics when engaging in fund selection over the past year. That perception of geopolitical risk has since heightened so far in 2024, with the US and UK conducting airstrikes against the Houthi militia in response to attacks on global shipping and the continued targeting of US troops in the Middle East by groups alleged to be sponsored by Iran.

Defence spending is on the rise. In 2022, a record $2.2 trillion was spent—the highest level ever recorded. While the number for 2023 have yet to be published, the figure is expected to surpass 2022. One particular area of growth is among European NATO members. These countries have been shaken out of their post-Cold War spending slump following the Russian invasion of Ukraine, with renewed efforts to reach the NATO 2% of GDP military spending target.

But in the 21st century, national security is not just about physical borders and military strength. Governments now must consider safeguarding cyberspace, which has become a new battleground. cybersecurity attacks increase consistently with growing geopolitical tensions, according to the EU’s agency for cybersecurity noted in its latest Threat Landscape report.

The Future of Defence UCITS ETF (NATO) brings these two components of modern defence together, capturing both growing conventional military budgets and the rising need for robust cybersecurity defence.

Using a passive, rules-based approach, companies must derive more than 50% of their revenues from the manufacture and development of military aircraft and/or defence equipment or have business operations in cyber security contracted with a NATO+ member country.

The maximum exposure by country is 60%, enabling non-U.S., NATO+ headquartered companies to achieve meaningful weight in the portfolio and providing more diversified global exposure.

 

Hector McNeil, Co-Founder and Co-CEO of HANetf comments:"“Whether it’s the ongoing war in Ukraine or the growing risk of conflict over Taiwan or the outbreak of war in the Middle East, it is clear the world is becoming a riskier place. The

“After years of underspending, NATO members in Europe are finally taking their share of defence spending seriously. Poland, for example, is now aiming to spend 4% of its GDP on defence and potentially build the largest land army in Europe.

“But it is not just spending on tanks and missiles. Cyberspace is now a new domain of warfare, which it has clearly been since both the 2014 and 2022 Russian invasions of Ukraine, which saw the latter relentlessly targeted by state-sponsored cyber-attacks.

“Investors are fully aware of this trend, hence the growing demand for defence exposure, which the Future of Defence UCITS ETF provides in a unique and appealing way. The ETF provides a well-balanced exposure to global defence firms, as well as a healthy weighting to the increasingly vital cyber component of national security. The ETF’s NATO screen also allows investors to be sure their exposure is not to geopolitically irresponsible actors, as well as capture the growth opportunity around European NATO’s vital need to rebuild their military capabilities. Defence related funds exist but they tend to be industrials heavy and not focused on NATO and its allies which, by definition, is a defensive alliance and not an aggressor. NATO is a unique ETF on this basis.”

  

Past performance is not indicative of future performance. When you invest in ETFs your capital is at risk.

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