VanEck has confirmed it is launching the VanEck Global Defence ETF (DFND) on the ASX this week, offering exposure to a portfolio of defence companies across diverse sectors such as aerospace, communications, security software and training.
The launch comes at a time when rising geopolitical risks have become an increasing consideration for portfolio construction, according to the firm, with investors assessing how the changing global security environment impacts government expenditure and, ultimately, the deployment of capital.
A recent report by the Stockholm International Peace Research Institute (SIPRI), for instance, showed that global military expenditure had grown 7 per cent to US$2.43 trillion, marking the steepest annual rise since 2009.
VanEck highlighted that this reflects an increased focus on national security as international peacekeeping has “deteriorated”, with the industry expected to grow nearly 40 per cent to US$3.1 trillion by 2030.
Last week, the firm first confirmed the imminent launch of the new ETF, noting that the product provides an opportunity for investors that is not readily available on the ASX.
“Unfortunately, the world has changed since the days of celebrating the peace dividend. Where countries used to extol the economic benefits of reduced defence spending, they’re ramping up military expenditure,” Arian Neiron, VanEck Asia-Pacific chief executive and managing director, said on Monday.
“Investors are adapting to the likely reality that this will keep rising in the years ahead.”
Neiron added that DFND follows VanEck’s Europe-first global defence fund launch, which has now been introduced locally on the back of strong demand.
“Global defence companies benefit from a unique investment complex. Demand is driven by structural growth drivers and cash flows are typically secured by long-term government mandates. This can be a strategic allocation for investors, providing a different form of equity risk management.”
The defence industry has historically been at the forefront of technological development and advancement, Neiron further underscored.
“This sector generally places a greater emphasis on research and development, leading to numerous innovations that have filtered through to mainstream applications such as GPS navigation, epinephrine auto-injectors (better known as EpiPen), the internet, and super glue.”
In June, the firm announced the addition of four new hires to its Australian business in a bid to increase its market share among financial advisers and institutional investors.
At the time, Neiron said: “Demand is ramping up as advisers get better acquainted with the opportunities our investment strategies bring”.
“However, there’s still a lot of room to grow. ETFs currently make up only a fraction of the total $4.75 trillion of funds under management in Australia.
“Our market-leading ETF strategies have the potential to capture a much bigger slice of the pie, and our new hires will help bolster our efforts to achieve that growth.”
