In recent years, many ASX investors have started looking beyond traditional sectors like banks, miners and real estate to gain exposure to long-term global structural trends.
One theme that has attracted increasing attention is global defence and aerospace.
For investors looking into that sector, there are now several ASX-listed defence ETFs.
Why global defence on the radar
Geopolitical tensions, strategic competition between major powers, and global conflicts have led to sustained increases in defence budgets across the US, Europe and parts of Asia.
Countries are committing to multi-year procurement programs covering aircraft, missile systems, naval fleets, cybersecurity and space capabilities.
For investors, this can translate into long-duration revenue pipelines for major contractors.
This phenomenon is also happening here in Australia.
What constitutes defence?
For the average punter, a defence company might be one that manufactures weapons, military planes, navy ships etc.
However modern defence is no longer limited to tanks and fighter jets.
It now includes cybersecurity, artificial intelligence, satellite systems, autonomous vehicles and advanced electronics.
Some ETFs tilt toward these next-generation technologies, giving exposure to both traditional defence primes and emerging defence-tech players.
It’s also important to point out that defence contractors often operate under government contracts, which can provide relatively stable cash flows compared with cyclical sectors.
What are the best ASX defence ETFs?
For investors looking for exposure to this sector, right now there are three ASX ETFs to consider:
- Betashares Global Defence ETF – Beta Global Defence ETF (ASX: ARMR)
- Vaneck Global Defence Etf (ASX: DFND)
- Global X Defence Tech ETF (ASX:DTEC).
All three are global in scope – they invest predominantly in international defence and aerospace companies.
What’s the difference?
The Betashares Global Defence ETF provides exposure to 60 companies which derive more than 50% of their revenues from the development and manufacturing of military and defence equipment, as well as defence technology.
According to Betashares, it only holds global companies headquartered in NATO member and major NATO ally countries.
This fund has risen 38% in the last year.
The VanEck fund targets the largest global companies involved in aerospace & defence, research & consulting, application software and electronic equipment & instruments.
It currently includes 36 holdings and has risen roughly 51.8% in the last year.
Unlike DFND and ARMR, which focus primarily on traditional global defence contractors, The Global X DTEC fund has a stronger tilt toward defence technology and next-generation systems.
This includes cybersecurity, AI, advanced electronics and autonomous platforms – rather than just large military hardware manufacturers.
The Global X fund is up approximately 49% in the last year.
Key considerations
Defence ASX ETFs are still thematic and concentrated and can be sensitive to political developments and budget cycles.
These funds also typically carry higher fees than broad index ETFs.
All three of these funds come with management fees between 0.50% p.a. and 0.65% p.a.
Finally, it’s also worth noting the ethical considerations for some investors, who may wish to target returns elsewhere, not related to global conflict and military spending.
The post What is the best global defence ASX ETF? appeared first on The Motley Fool Australia.
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Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.