((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto)) by Sudip Kar-Gupta
Fund manager VanEck’s defense-industry focused exchange traded fund (ETF) reached more than $550 million in net assets in its first year, VanEck said Monday, highlighting how current global conflicts have pushed investors to turn to the defense sector.
The New York company launched its VanEck Defense UCITS ETF
DFNG.L at the end of March 2023. The ETF is up approximately 20% in 2024, and has reached approximately $560 million in net assets in one year.
The war in Ukraine and the conflict between Israel and Hamas, which has also attracted Iran, have led many governments to call for increased military spending.
In April, British Foreign Secretary David Cameron called on NATO allies to increase defense spending and production to support Ukraine against Russia, while Israel also changed its budget to increase defense spending.
“Traditionally, the defense industry is a fairly sensitive topic, especially in Europe. However, the outbreak of war in Ukraine and other areas of tension and conflict around the world have changed the way many people view defense policy,” said Martijn Rozemuller, Managing Director of VanEck Europe.
The ETF’s top holdings are French stocks Thales TCFP.PA and Safran SAF.PA, while others include Italian firm Leonardo LDOF.MI and US defense technology company Booz Allen Hamilton
BAH.N.
Earlier this month, Goldman Sachs strategists said they did not recommend European defense stocks due to their recent outperformance, with the STOXX Europe aerospace and defense index .SXPARO up about 27% in 2024 – surpassing a 5% gain for the broader STOXX Europe index .STOXX.
Nonetheless, Grégoire Laverne, fund manager at APICIL Asset Management, said defense sector stocks remained safe bets in the long term, given the global political situation.
“We believe that defense remains a compelling value in fund managers’ portfolios, given that governments, not only in Europe but around the world, continue to increase their military spending,” added Mr. Laverne, whose company holds shares in Thales and Safran.