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<h2>Defense ETFs in Focus: Sector vs. Thematic Approaches</h2>
<p>With ongoing global events keeping national security and defense spending in the spotlight, our attention naturally turns to how investors are allocating capital within the defense ecosystem. The space has seen explosive growth, now encompassing 25 ETFs managing tens of billions in total AUM—impressively, 11 of these funds have launched since the start of 2025 alone to capture this surging thematic demand. This expansion is driven by massive investor appetite, evidenced by over $15 billion in new inflows pouring into the category over that same period. At ETF Action, we track these allocations closely across both our designated Sector and Thematic categories.</p>
<p>To set the stage, the chart below illustrates the current landscape of Assets Under Management (AUM) and flows, broken down by these two distinct segments.</p>
<div class="image-safe-harbor">
<img decoding="async" src="https://etfactionconte.wpenginepowered.com/wp-content/uploads/2026/03/2026-03-02_10-47-34.png" alt="AUM and Flows Breakdown by Segment: Thematic vs. Sector">
</div>
<p>Understanding the distinction between these two categories is critical for portfolio construction. A <strong>Sector</strong> approach generally provides pure-play exposure directly targeting the GICS Aerospace & Defense industry. In contrast, a <strong>Thematic</strong> approach is often more nuanced. It captures the broader defense ecosystem by including allocations to non-traditional sectors and industries, incorporating elements like cybersecurity, advanced materials, and specialized technology firms that support modern defense initiatives.</p>
<h2>Ownership Structure & Fund Metrics</h2>
<p>Digging deeper into the underlying portfolios, we can observe significant dispersion in how these ETFs achieve their defense exposure. Below is a detailed breakdown of the qualifying ETFs, highlighting their asset base, management fees, geographical footprints, and portfolio concentration metrics.</p>
<div style="overflow-x: auto; margin-bottom: 32px;">
<table>
<thead>
<tr>
<th>Ticker</th>
<th>Fund Name</th>
<th>Inception Date</th>
<th>AUM ($MM)</th>
<th>Fee (%)</th>
<th>Aero & Defense (%)</th>
<th># Stocks</th>
<th>U.S. (%)</th>
<th>Foreign (%)</th>
<th>Wtd. Avg. Mkt Cap ($M)</th>
<th>Top 10% (%)</th>
</tr>
</thead>
<tbody>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/ITA?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">ITA</a></td>
<td>iShares U.S. Aerospace & Defense ETF</td>
<td>2006-05-01</td>
<td>15,928.0</td>
<td>0.38</td>
<td style="background-color: #334155; color: #fff;">99.91</td>
<td>41</td>
<td>99.90</td>
<td>0.10</td>
<td>166,673</td>
<td>75.68</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/PPA?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">PPA</a></td>
<td>Invesco Aerospace & Defense ETF</td>
<td>2005-10-26</td>
<td>8,142.1</td>
<td>0.50</td>
<td style="background-color: #64748b; color: #fff;">79.41</td>
<td>60</td>
<td>94.61</td>
<td>5.38</td>
<td>129,890</td>
<td>61.70</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/SHLD?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">SHLD</a></td>
<td>Global X Defense Tech ETF</td>
<td>2023-09-11</td>
<td>7,404.0</td>
<td>0.50</td>
<td style="background-color: #475569; color: #fff;">87.48</td>
<td>49</td>
<td>59.39</td>
<td>40.55</td>
<td>92,143</td>
<td>59.78</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/XAR?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">XAR</a></td>
<td>State Street SPDR S&P Aerospace & Defense ETF</td>
<td>2011-09-28</td>
<td>6,123.1</td>
<td>0.35</td>
<td style="background-color: #1e293b; color: #fff;">100.00</td>
<td>40</td>
<td>99.29</td>
<td>0.67</td>
<td>60,473</td>
<td>38.58</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/MISL?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">MISL</a></td>
<td>First Trust Indxx Aerospace & Defense ETF</td>
<td>2022-10-25</td>
<td>1,513.6</td>
<td>0.60</td>
<td style="background-color: #475569; color: #fff;">86.98</td>
<td>38</td>
<td>99.95</td>
<td>–</td>
<td>111,592</td>
<td>62.33</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/EUAD?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">EUAD</a></td>
<td>Select STOXX Europe Aerospace & Defense ETF</td>
<td>2024-10-22</td>
<td>1,469.4</td>
<td>0.05</td>
<td style="background-color: #334155; color: #fff;">97.20</td>
<td>13</td>
<td>–</td>
<td>71.86</td>
<td>101,394</td>
<td>96.60</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/ARKX?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">ARKX</a></td>
<td>ARK Space & Defense Innovation ETF</td>
<td>2021-03-30</td>
<td>737.5</td>
<td>0.75</td>
<td style="background-color: #e2e8f0; color: #000;">44.27</td>
<td>32</td>
<td>86.64</td>
<td>12.92</td>
<td>339,243</td>
<td>63.39</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/UFO?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">UFO</a></td>
<td>Procure Space ETF</td>
<td>2019-04-11</td>
<td>356.5</td>
<td>0.75</td>
<td style="background-color: #e2e8f0; color: #000;">41.08</td>
<td>49</td>
<td>67.01</td>
<td>32.55</td>
<td>38,727</td>
<td>47.14</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/KDEF?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">KDEF</a></td>
<td>PLUS Korea Defense Industry Index ETF</td>
<td>2025-02-05</td>
<td>163.5</td>
<td>0.65</td>
<td style="background-color: #e2e8f0; color: #000;">49.77</td>
<td>23</td>
<td>–</td>
<td>97.25</td>
<td>15,428</td>
<td>69.67</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/FITE?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">FITE</a></td>
<td>State Street SPDR S&P Kensho Future Security ETF</td>
<td>2017-12-26</td>
<td>111.9</td>
<td>0.45</td>
<td style="background-color: #f1f5f9; color: #000;">36.23</td>
<td>77</td>
<td>88.62</td>
<td>11.32</td>
<td>49,247</td>
<td>19.55</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/NATO?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">NATO</a></td>
<td>Themes Transatlantic Defense ETF</td>
<td>2024-10-11</td>
<td>94.9</td>
<td>0.35</td>
<td style="background-color: #475569; color: #fff;">88.73</td>
<td>78</td>
<td>68.96</td>
<td>30.62</td>
<td>139,244</td>
<td>60.93</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/IDEF?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">IDEF</a></td>
<td>iShares Defense Industrials Active ETF</td>
<td>2025-05-19</td>
<td>93.5</td>
<td>0.55</td>
<td style="background-color: #64748b; color: #fff;">71.89</td>
<td>111</td>
<td>57.99</td>
<td>41.60</td>
<td>99,965</td>
<td>39.83</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/ROKT?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">ROKT</a></td>
<td>State Street SPDR S&P Kensho Final Frontiers ETF</td>
<td>2018-10-22</td>
<td>77.8</td>
<td>0.45</td>
<td style="background-color: #cbd5e1; color: #000;">54.84</td>
<td>35</td>
<td>97.18</td>
<td>2.80</td>
<td>52,208</td>
<td>38.18</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/WDEF?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">WDEF</a></td>
<td>WisdomTree Europe Defense Fund</td>
<td>2025-07-17</td>
<td>71.2</td>
<td>0.45</td>
<td style="background-color: #475569; color: #fff;">87.92</td>
<td>32</td>
<td>–</td>
<td>99.97</td>
<td>57,693</td>
<td>69.46</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/JEDI?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">JEDI</a></td>
<td>Defiance Drone and Modern Warfare ETF</td>
<td>2025-09-25</td>
<td>61.2</td>
<td>0.69</td>
<td style="background-color: #64748b; color: #fff;">72.14</td>
<td>26</td>
<td>65.73</td>
<td>34.10</td>
<td>60,025</td>
<td>65.23</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/DRNZ?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">DRNZ</a></td>
<td>REX Drone ETF</td>
<td>2025-10-29</td>
<td>55.3</td>
<td>0.65</td>
<td style="background-color: #cbd5e1; color: #000;">50.32</td>
<td>41</td>
<td>43.43</td>
<td>56.46</td>
<td>31,644</td>
<td>70.15</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/GCAD?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">GCAD</a></td>
<td>Gabelli Commercial Aerospace and Defense ETF</td>
<td>2023-01-03</td>
<td>27.9</td>
<td>0.90</td>
<td style="background-color: #475569; color: #fff;">89.04</td>
<td>35</td>
<td>98.40</td>
<td>1.50</td>
<td>69,148</td>
<td>56.11</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/WDAF?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">WDAF</a></td>
<td>WisdomTree Asia Defense Fund</td>
<td>2025-09-12</td>
<td>21.4</td>
<td>0.45</td>
<td style="background-color: #94a3b8; color: #000;">65.88</td>
<td>46</td>
<td>–</td>
<td>99.89</td>
<td>21,774</td>
<td>60.83</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/FOWF?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">FOWF</a></td>
<td>Pacer Solactive Whitney Future of Warfare ETF</td>
<td>2024-12-17</td>
<td>14.4</td>
<td>0.49</td>
<td style="background-color: #cbd5e1; color: #000;">55.68</td>
<td>86</td>
<td>75.21</td>
<td>24.71</td>
<td>186,782</td>
<td>52.23</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/WAR?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">WAR</a></td>
<td>U.S. Global Technology and Aerospace & Defense ETF</td>
<td>2024-12-30</td>
<td>12.8</td>
<td>0.60</td>
<td style="background-color: #f1f5f9; color: #000;">36.31</td>
<td>28</td>
<td>88.21</td>
<td>11.65</td>
<td>119,915</td>
<td>59.84</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/TSSD?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">TSSD</a></td>
<td>Truth Social American Security & Defense ETF</td>
<td>2025-12-30</td>
<td>12.1</td>
<td>0.65</td>
<td style="background-color: #cbd5e1; color: #000;">51.97</td>
<td>56</td>
<td>97.67</td>
<td>–</td>
<td>94,980</td>
<td>59.82</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/WDGF?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">WDGF</a></td>
<td>WisdomTree Global Defense Fund</td>
<td>2025-09-12</td>
<td>8.7</td>
<td>0.45</td>
<td style="background-color: #475569; color: #fff;">89.83</td>
<td>88</td>
<td>54.77</td>
<td>45.17</td>
<td>82,650</td>
<td>47.33</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/XDEF?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">XDEF</a></td>
<td>Xtrackers Europe Defense Technologies ETF</td>
<td>2026-02-19</td>
<td>4.9</td>
<td>0.35</td>
<td>–</td>
<td>–</td>
<td>–</td>
<td>–</td>
<td>–</td>
<td>–</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/GDFN?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">GDFN</a></td>
<td>Tema International Defense Innovation ETF</td>
<td>2025-09-25</td>
<td>1.1</td>
<td>0.75</td>
<td style="background-color: #475569; color: #fff;">89.93</td>
<td>32</td>
<td>17.59</td>
<td>81.28</td>
<td>57,836</td>
<td>45.26</td>
</tr>
<tr>
<td><a href="https://app.etfaction.com/platform/databases/etfs/etf/UFOD?utm_source=etf_com&utm_medium=syndication&utm_campaign=research&utm_content=inside-the-defense-etf-boom-visualizing-holdings-overlap-and-valuations" target="_blank">UFOD</a></td>
<td>Tuttle Capital UFO Disclosure ETF</td>
<td>2026-02-05</td>
<td>0.8</td>
<td>0.99</td>
<td>–</td>
<td>–</td>
<td>–</td>
<td>–</td>
<td>–</td>
<td>–</td>
</tr>
</tbody>
</table></div>
<h2>Portfolio Overlap: How Different Are These ETFs?</h2>
<p>While these funds all target the defense sector or theme, their actual holdings can vary wildly depending on their specific mandates. To illustrate just how different these ETFs can be, the chart below highlights the portfolio overlap among the 10 largest defense ETFs, detailing the intersection of their holdings and the most common names shared across their portfolios.</p>
<div class="image-safe-harbor">
<img decoding="async" src="https://etfactionconte.wpenginepowered.com/wp-content/uploads/2026/03/2026-03-02_11-47-26.png" alt="Portfolio Overlap Matrix for the Top 10 Defense ETFs">
</div>
<h2>Performance vs. Valuations: The Multiple Expansion Story</h2>
<p>Looking beyond the sheer growth in assets and fund construction, we must evaluate how these portfolios are actually performing and, more importantly, how they are being priced by the market. In the chart below, we contrast the Total Returns against the Forward P/E ratios for a select group of these ETFs.</p>
<div class="image-safe-harbor">
<img decoding="async" src="https://etfactionconte.wpenginepowered.com/wp-content/uploads/2026/03/2026-03-02_12-08-54.png" alt="Total Return and FWD P/E Ratios for Select Defense ETFs">
</div>
<p>The data reveals a compelling—and potentially cautionary—trend. While investors have undoubtedly enjoyed impressive absolute returns across the defense theme over the past year, these gains have not yet been fully supported by a commensurate surge in underlying earnings growth. Instead, what we are witnessing is significant multiple expansion. Valuation multiples are rising almost as rapidly as the share prices themselves, indicating that much of the recent performance is being driven by strong market sentiment and the anticipation of future defense contracts rather than currently realized bottom-line growth.</p>
<h2>Under the Hood: SHLD Portfolio Breakdown</h2>
<p>To illustrate how thematic defense portfolios are constructed and perform at the constituent level, we highlight the Global X Defense Tech ETF (SHLD). We selected SHLD for this analysis due to its distinct diversification across multiple tech-forward industries (applicable to modern defense themes) and its modified market-cap weighting approach, which caps individual positions at 8% to prevent top-heavy concentration.</p>
<p>The heatmap below visualizes SHLD’s Year-to-Date (YTD) returns. To better understand the ecosystem, the underlying holdings are grouped by their respective GICS industries, with the size of each box scaled to represent the stock’s current weight within the ETF.</p>
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<img decoding="async" src="https://etfactionconte.wpenginepowered.com/wp-content/uploads/2026/03/2026-03-02_11-39-50.png" alt="Heatmap of YTD returns for Global X Defense Tech ETF (SHLD) grouped by GICS industry">
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<h2>Conclusion: Looking Under the Hood</h2>
<p>As the defense ecosystem continues to evolve and capture immense investor interest, the underlying mechanics of these ETFs prove that no two funds are created equal. Whether opting for a pure-play sector approach or a diversified, tech-forward thematic strategy, investors must look beyond the fund name to understand their true exposures. Furthermore, with valuation multiples stretching as rapidly as they are, the market is clearly pricing in significant future growth. This dynamic makes careful fund selection and a thorough understanding of portfolio construction more critical than ever for those looking to allocate capital in this space.</p>
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Disclosures: This material is for informational purposes only and should not be considered investment advice. All investments, including ETFs, involve risk, including the possible loss of principal. This analysis was developed by the team at ETF Action. We leverage advanced AI tools to assist in the drafting and refinement of our content, based on our expert prompts, direction, and final review.<br />
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