Retail investors are rushing into the space investment sector ahead of SpaceX IPOand an ETF took advantage of this enthusiasm.
Tema ETF’s Space Innovators ETF, launched on March 30 and trades under the ticker symbol NASAsurpassed $1 billion in assets in just 37 trading days, and by the end of the last trading week had reached over $2.6 billion in assets.
This rapid increase is due in part to retail investors seeking exposure to SpaceX ahead of its IPO.
Although SpaceX has taken an unusual approach to its offering, creating access for individual investors through brokerage firms at an atypical level in new transactions generally dominated by institutional investors, the NASA fund is another alternative for investors to access Elon MuskThe rocket company. He already directly owns privately traded SpaceX shares. It is one of the few investment vehicles available to retail investors, with SpaceX currently making up around 7.5% of the fund.
“If we want to invest in space…We need to provide exposure to SpaceX,” Maurits Pot, founder and CEO of Tema ETFs, said Wednesday on CNBC’s “ETF Edge.”
Pot said there are no plans to sell shares once the IPO occurs. “For us, the IPO is simply an observation of position relative to market price,” he said.
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NASA 1M
NASA isn’t the only ETF with access to SpaceX, although options are limited. Mutual fund manager and billionaire Ron Baron, a long-time investor in Tesla and SpaceXowns the rocket company through its First Principles fund (RONB). Tesla is the largest holding in the RONB ETF, with more than 14%, while holding nearly 2% of the fund’s assets in SpaceX. The ERShares private-public crossover ETF (XOVR), which provides access to private, development-stage companies, also owns shares of SpaceX, which it says is worth close to $300 million based on an expected IPO value of more than $1.5 trillion.
Setting a precise valuation for the SpaceX deal remains a point of contention in the market and among investors ahead of the deal’s price.
Mike Akins, founding partner of ETF Action, said on “ETF Edge” that the structure of the ETF itself is what makes this type of access possible for the everyday investor. “Ten or twenty years ago you were talking about a space theme like this, an investor would have to go and look for all these companies. Now there’s a ticker tape,” Akins said.
Todd Sohn, chief ETF strategist at Strategas, noted that several new space ETFs have launched in recent months, including the Van Eck Space ETF (CHAIN), the Global X Space Tech ETF (ORBX), and Roundhill Investments’ space and technology ETF (MARCH), which in itself is a signal that retail investors should pursue this theme as they have with other recent thematic deals highlighting technological innovation, from AI to technology innovation. quantum computing. “To me, it’s generally a pretty good read that the industry expects space to be the next big thing,” Sohn told CNBC. “It’s a very similar idea to what AI was a few years ago and one that continues.”
A total of six space-themed ETFs have debuted in the past three months. But Sohn cautioned that not all funds are equal. “It all depends on how pure or watered down the ETF is, so due diligence on that is really important now,” he said.
There are other space investment-themed ETFs that have been on the market for years already, building portfolios of stocks that include purely high-risk space exploration companies, satellite companies, and broader names in the aerospace and defense sector.
The Procure Space ETF (UFO), launched in 2019 and with over $1.2 billion in assets, holds Rocket Lab, Luciole AerospatialeAnd Planet Laboratories among its main titles. The SPDR S&P Kensho Final Frontiers ETF (ROKT), launched in 2018, also holds Intuitive machines And Rewire.
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Five-year performance of the UFO ETF which invests in space and aerospace stocks.
The ARK Space and Defense Innovation ETF (ARKX) is a good example of how the set of top stocks can vary across the entire market, with its portfolio also including Amazon and Deere.
Sohn says investors interested in these ETFs and the space investing theme should consider the degree of overlap a portfolio has with more classic defense industry names, as well as the fund’s concentration in a small group of high-risk stocks.
“There are only a limited number of companies that do this and are public,” Sohn said. “Some of them may have 30 holdings, some of them may have over fifty,” he said of the current crop of space ETFs. “I have a feeling that once SpaceX is publicly traded and traded for a while, you’ll see some of these funds turn into more concentrated bets, depending on how they’re managed,” he said.
That’s another factor for investors to consider: NASA, for example, is an actively managed fund, rather than tracking an existing stock index designed to represent the theme, which is the approach of UFO, ORBX, ROKT and others.
Investors will pay more for an actively managed stock-picker approach to space: NASA has an annual net expense ratio of 0.87%, while ORBX charges 0.50% and ROKT’s expense ratio is 0.45%.
It is clear that Elon Musk will be a big winner from the SpaceX IPO and probably the world’s first billionaire. But Akins and Sohn said the biggest risk for retail investors getting into the space theme is volatility.
Risks in the space market became more evident this week with the launch pad explosion of Blue Origin’s New Glenn rocket.
“Expect volatility. That’s usually what happens in early-stage industries. There will be companies that outperform and companies within ETFs that crash because their business model doesn’t make sense,” Sohn said.
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