On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research, Todd Rosenbluth, discussed the Procure Space ETF (UFO ) with Chuck Jaffe of Money Life. The pair discussed several topics related to the ETF, in order to give investors a deeper understanding of it.Chuck Jaffe: One fund, on point for today. The expert to talk about it. This is the ETF of the Week.
Welcome to the ETF of the Week, where we get the latest take from Todd Rosenbluth, head of research at VettaFi. And at VettaFi.com, you’ll find all the tools you need to be a savvier, smarter ETF investor. And to get more details on the new, newsworthy, trending, and timely ETFs we talk about here.
Todd Rosenbluth, great to chat with you again!
Todd Rosenbluth: It’s great to be back, Chuck.
Chuck Jaffe: Your ETF of the Week is…
Todd Rosenbluth: The Procure Space ETF, UFO.
Chuck Jaffe: UFO, the Procure Space ETF. Let’s see. New, newsworthy, trending, and timely. Well, it’s not actually new, but newsworthy, trending, and timely for sure! Is there anything other than SpaceX (SPCX) that’s driving this one this week?
Todd Rosenbluth: Well, yeah. So first of all, SpaceX is going to come out on Friday for folks that are listening to this on Thursday. And if you’re watching this afterwards, it will have already come out. The Procure Space ETF does not own SpaceX yet. And yet, the ETF has climbed. It’s been a rocket ship. I could use all the analogies that are appropriate.
It is now over $1 billion in assets. It started the year much, much smaller. A year or two ago, this was a $100 million or so ETF. So it’s had a tremendous climb in asset growth and performance. And that’s because the stocks that are inside keep climbing higher. So, I think this is a well-timed ETF. Perhaps we’ll talk about SpaceX in a moment.
But I do have to disclose that VettaFi, the company I work for, is the index provider behind this ETF. It’s the oldest of those space ETFs. So, that’s why I think it’s relevant to be talking about, but… have to disclose that.
Chuck Jaffe: This is an ETF that took off — again, puns, all puns intended in this one — that took off to a great extent also after the Artemis mission. And it had great success then because people started seeing more potential in space stocks and seeing how it could work out. So from that perspective, I mean, thematic investing is something you and I talk about, but this is a very long-term theme.
So, how does that fit in with the way you size up thematic kinds of funds?
Todd Rosenbluth: Yeah. So thematic investing in general is probably going to be a slice of the portfolio. Maybe you want to come back to that, so I’ll save my full comments on that. But many of these themes have long duration behind them. Some of them are nearer term. We’ve talked about artificial intelligence related themes, and there is considerable profitability coming from artificial intelligence-related companies.
There’s revenue growth that’s happening. There’s some profitability that’s happening within the space economy, but it is still early days. And there are companies inside this ETF, UFO, right now like Rocket Lab (RKLB) and Globalstar (GSAT), SiriusXM Holdings (SIRI), EchoStar (SATS). Some of these are companies that people will be well familiar with. Some of them they’re going to be less familiar with. When SpaceX gets added to UFO in the very, very near term, it’s obviously going to be a flagship stock, but you’ll see diversification benefits of other companies that are connected to the space ecosystem.
Chuck Jaffe: You talked about VettaFi being the index provider here for the thing that this is based on. SpaceX is a really interesting IPO from what it’s doing to indexes, because it’s coming out so large that if you’ve got a cap-weighted index, it winds up kind of having a ton of influence immediately, even if the company is so young, it doesn’t necessarily deserve that influence.
Is any of that happening here?
Todd Rosenbluth: So let me break that down in a couple of different parts. People are probably seeing that SpaceX is being valued at over a trillion, or is likely to be valued at over $1 trillion and maybe close to $2 trillion after everything settles. The actual stock that’s going to be trading is going to have a considerably smaller market capitalization, a public market capitalization, because most of the shares, the vast majority of the shares, will still be privately owned and held.
For the UFO ETF, SpaceX is going to be added in at a roughly mid-single digit percentage of the broader portfolio. And then as more shares get created, it is likely to climb overall. But for more broadly diversified strategies tied to the Russell 1000, which is going to be adding SpaceX, it’s going to be considerably smaller, perhaps much less than 1%.
Chuck Jaffe: You know, I have long said that IPO stands for “it’s probably overpriced.”
With a case like this coming out so popular, but it’s an index-based product, it’s going to have to buy it. Do you ever kind of, you know, as we look at this ETF, do we think this ETF will benefit down the line? Because it’s interesting. This fund entered this year just below $40 bucks a share. A couple of weeks ago it was nearing $70 a share, and it is now back in the low $50s. So around the time the SpaceX IPO came out, this fund took it on the chin.
And I’m curious, because we don’t normally talk about timing and things along those lines, but I’m curious, while we’re making it ‘of the week’ for this week, this is the week of the IPO, if you might wait on a fund like this to see how it sorts out and digests this change in the industry?
Todd Rosenbluth: With any of these cases, this is to get funds on the radar for investors, this being when we’re talking about it as ETF of the Week, and this is not a recommendation to buy. You’re right. In the past year — and I’m just looking off to the side — through May, UFO was up, the ETF is up 170%. It’s had a great run.
There are companies inside that are doing well. But yet investors need to be mindful of understanding the valuation, the prospects. How does this fit into a portfolio? I still think that UFO is going to be a strong satellite position, pun intended, for people who want to have a diversified thematic strategy, but you do need to make sure that it fits into your growth trajectory and you’re paying a fair price.
So with any ETF, you want to make sure that it hasn’t run too far too fast, and as such, do the due diligence.
Chuck Jaffe: The role that a fund like this plays in a portfolio — obviously satellite, core and satellite, etc., but how much do you let satellites be? Like, what percentage of a portfolio is enough to have impact? Because if you don’t think it’s going to have impact, you shouldn’t bother to buy it regardless, but not so much that it has undue impact?
Todd Rosenbluth: So what we at VettaFi have found is that many advisors and investors will use up to 10% of their overall portfolio towards thematic or fast-growing strategies to complement the core. So the core that’s tied to the S&P 500 or the Russell 1000 from a US equity standpoint. And what investors or advisors will do is hold a couple of thematic ETFs.
So we talked a few weeks ago about the Roundhill Memory ETF, (DRAM). That is a completely different thematic strategy than UFO is. The drivers are different. They’re both tied to a growth area of the marketplace. In the case of UFO, with the exception of SpaceX, which you’re likely to find in smaller doses in some of your broadly diversified ETFs in the near future, many of the stocks that you’re going to find in UFO, you’re not going to find at all, or you’re going to find in extremely small slices of a broader portfolio.
So that’s why I think of thematic ETFs as being able to complement a core portfolio as opposed to — you’re right, you don’t want to own too much. If you own too much of thematic ETFs, then you’re taking on a lot more risk. You’re getting rewarded sometimes, but when the market sells off, you’re going to get punished much harder.
Chuck Jaffe: Well, it is definitely a far-out pick, but it’s an interesting one, especially this week! It’s UFO, the Procure Space ETF, the ETF of the Week from Todd Rosenbluth at VettaFi. Todd, great stuff. We’ll talk to you again next week!
The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And yes, that’s me. You can learn all about my hour-long weekday show by going to MoneyLifeShow.com or by searching for it wherever you find great podcasts.
Now, if you’re searching for great information on exchange-traded funds, check out VettaFi.com they have all the tools you need to be a better investor. They’re on X @Vetta_Fi and Todd Rosenbluth, their head of research, my guest here on the ETF of the Week, he’s on X too @ToddRosenbluth
The ETF of the Week is here for you every Thursday. Follow us on your favorite podcast app to make sure you don’t miss an episode. And we’ll introduce you to another great ETF next week. Until then, happy investing, everybody!For more news, information, and analysis, visit the Thematic Investing Content Hub.
Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.
VettaFi LLC (“VettaFi”) is the index provider for UFO , for which it receives an index licensing fee. However, UFO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of UFO.
