New Listing

HANetf unveils NATO-focused future of defence ETF

The second defence ETF to list in Europe

Theo Andrew

a man in a suit

HANetf is expanding its thematic range with the launch of a NATO-focused future of defence ETF.

The Future of Defence UCITS ETF (NATO) will list on the London Stock Exchange and the Deutsche Boerse on 4 July with a total expense ratio (TER) of 0.49%.

NATO, which tracks the EQM Future of Defence index, will also list on the Borsa Italiana later in the month.

The index aims to offer exposure to global companies generating revenues from NATO and NATO-allies (NATO+) defence and cyber defence spending.

Companies involved in the index must derive more than 50% of their revenues from the manufacture and development of air, sea, space, land and cyber military equipment.

HANetf said this reflects how cyberspace has become a new battleground, with cybersecurity attacks increasing consistently with growing geopolitical tensions, according to the European Union’s latest Threat Landscape report.

US equities currently account for 60% of the portfolio, the maximum weighting, followed by France (10%), the UK and Israel (9%) and Italy (5%).

Out of NATO’s 41 holdings, its top stocks include Palo Alto Networks (6.3%), BAE Systems (5.3%), IT company Thales Group (5.2%), Broadcom (5%) and Cisco Systems (4.9%).

The ETF aims to take advantage of the current geopolitical instability as NATO countries dramatically increase their defence spending in the face of the war in Ukraine and building tensions between China and Taiwan.

In 2022, global military spending hit $2.2trn, the highest-level ever recorded, according to the Stockholm International Peace Research Institute.

NATO members have been responsible for much of the spending, with renewed efforts to reach the NATO 2% of growth domestic product military spending target.

Hector McNeil (pictured), founder and co-CEO of HANetf, said: “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.

“[NATO] will provide investors with a means of accessing the companies that will be poised to benefit from increased spending by NATO and NATO+ allies on both military hardware and cyber defence.

“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.”

It is the second defence-focused ETF to launch in Europe, following the VanEck Defense UCITS ETF (DFNS), which listed in April with a TER of 0.55%.

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