HANetf has launched a Europe-focused defence ETF in anticipation of higher defence spending throughout the region.
It will track the EQM Future of Defence index, which is up 23.9% this year in the wake of president Donald Trump signalling that he would withdraw US military support from Ukraine and other intergovernmental treaties.
European countries have flocked to fill the gap, with the European Commission unveiling the ReArm Europe Plan yesterday that could increase spending to over €800bn by 2023.
See also: Will a Ukraine ceasefire boost or burden Europe?
Commission president Ursula von der Leyen encouraged countries to “buy more European” now that the US can not be relied upon for support.
“The era of the peace dividend is long gone. The security architecture that we relied on can no longer be taken for granted,” she said.
“Europe is ready to step up. We must invest in defence, strengthen our capabilities, and take a proactive approach to security.”
See also: Fed holds rates as Trump’s tariffs downgrade US growth forecasts
HANetf noted the risk of US disengagement and will screen out US-linked firms to ensure the highest exposure to European defence companies.
They have already undergone a steep re-rating in recent weeks, but head of research Tom Bailey said the new ‘Readiness 2030’ agenda could maintain a higher level of spending for years to come.
“European defence spending has surged in response to growing security challenges. But despite this increase, Europe still faces an €850bn cumulative defence investment gap since 2014, reinforcing the need for sustained investment in military capabilities,” he said.
“Geopolitical realities are forcing Europe to reduce reliance on US military support and take greater responsibility for its own security. With almost 1.5 million active-duty military personnel, Europe has the manpower but lacks the integrated capabilities to act as a cohesive force. Addressing these structural inefficiencies will require significant investment in modern equipment, logistics, and command systems.”
See also: US equities ditched at fastest rate ever
HANetf’s new vehicle will be a follow up to the Future of Defence ETF it launched in July 2023, which is up 72.1% since inception as geopolitical tensions have escalated.
Founder and CEO Hector McNeil said it was apt time to launch a European-focused version of the ETF amid “tremendous demand” from investors.
“As a proudly European ETF firm, it is our duty to support investment into the European defence sector as efficient capital markets will allow European champions to expand their capabilities much more efficiently,” he said.
“The new ETF can provide an important role in encouraging a simple way for all investor types from retail to institutional to invest in this space.”