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With Defense Spending, Europe Is Putting Its Money Where Its Mouth Is

BY | ETF Database
7:07 am ET 09/18/25 | 4 VIEWS
It’s always better to walk the walk than talk the talk. For years, it could be argued that European nations did little of either when it came to defense spending. Now, more than three years into the Russia-Ukraine conflict, things are changing, and those alterations spell opportunity for investors.All that and more speaks to the case for the WisdomTree Europe Defense Fund (WDEF ), which came to market in July. WDEF may be a prime example of a new ETF where advisors and investors should ignore age (or lack thereof) and focus on an increasingly rock-solid investment case. Although WDEF debuted after the event, specifically at the June 2025 NATO summit in The Hague. Points of emphasis at the summit included the war in Ukraine and President Trump’s continued push to see NATO allies foot a larger portion of the organization’s defense bill. Notably, for investors considering WDEF, it is worth mentioning that ex-US NATO countries plan to allocate 5% of their respective GDPs to defense expenditures over the next 10 years. Even if those increases are gradual, in aggregate they have the potential to boost WDEF holdings.WDEF Taps Into GrowthAs noted at the outset of this piece, what matters is European nations making good on pledges to lift defense expenditures. Fortunately for WDEF investors, there’s evidence that’s already taking place. “Defense spending in Europe surged 17% in 2024, but this is only the early innings,” according to WisdomTree. “While traditional hardware grabs headlines, the real capital flows are forming around digitally native systems: electronic warfare, soldier modernization, tactical IT, autonomous platforms, and secure battlefield networks.” Another point in favor of WDEF is that the ETF’s benchmark, the WisdomTree Europe Defense Index, isn’t solely dependent on large-cap stocks to drive returns. As of Sept. 11, about 20% of the gauge was allocated to mid- and small-cap names, potentially positioning the new ETF to benefit from holdings that don’t command as much attention as their large-cap peers. “Small- and mid-cap defense tech firms in Europe, many still under the radar of global allocators, are seeing a tailwind they haven’t experienced in a generation,” adds WDEF’s issuer. “For U.S. investors, this is not a question of whether defense is investable; it’s a question of whether your exposure reflects the shape of modern rearmament.” Adding to the potential potency of WDEF is a screening process that ensures a certain level of defense purity while not overwhelming investors with industrial conglomerates. “By screening for revenue-specific exposure to defense, WDEF sidesteps the legacy-industrial baggage and anchors investors directly to the innovation curve. If the macroeconomic story is that European security is now a structural investment priority, then WDEF is the vehicle that brings that thesis into a liquid, investable, and scalable format,” concludes WisdomTree. For more news, information, and analysis, visit the Modern Alpha Content Hub.

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