The leading investment trusts and funds for European defense expenditures

These trusts and funds may put you in a position to profit from the rush by European leaders to increase defense spending

Europe is spending more on defense as it struggles with the US's growing lack of interest. What are the best trusts and funds to expose people to this harsh new reality?

Funds that hold the best stocks for the surge in defense spending are currently experiencing a bull run. There seems to be more news about European defense spending commitments every day as the continent gets over the sluggishness that has set in after decades of the US essentially ensuring its security.

As a result of the spending commitments, European defense stocks have experienced notable increases so far this year.

"As security threats have grown, European defense spending has increased dramatically. "Today, 23 NATO members have met the 2 percent of GDP target, which is a historic shift from just six in 2021," says Tom Bailey, head of research at HANetf.

The need for consistent investment in military capabilities is further supported by the fact that, despite this increase, Europe still has a cumulative defense investment gap of 850 billion since 2014.

"With defense being a major component of the chancellor's Spring Statement, the case for defense stocks seems all too clear," stated Annabel Brodie-Smith, director of communications for the Association of Investment Companies (AIC).

Chancellor Rachel Reeves' Spring Statement restated Prime Minister Keir Starmer's earlier promises to increase UK defense spending, with an additional £2 billion allocated to the defense budget in 2025 - 2026 and a goal of 25% of GDP going to defense by April 2027.

As a result of increased spending commitments, certain European defense stocks, such as BAE Systems and Rolls-Royce, are experiencing robust rallies. The biggest defense company in Germany, Rheinmetall, has seen a more than twofold increase in share price this year.

To obtain diversified exposure to the trend, however, which investment trusts and exchange-traded funds (ETFs) are available to investors?

Trusts for investments in European defense.

According to Brodie-Smith, "the share prices of some defense companies have increased, but that's not the case across the board." "We have determined which investment trusts may be most positioned to profit from their exposure to defense.

After analyzing the investment trusts with the highest defense exposure, the AIC identified the Schroder UK Mid Cap Fund (LON:SCP), which it claims has 10% of its assets devoted to defense.

According to Jean Roche, manager of the Schroder UK Mid Cap Fund, "we believe that we are at the beginning of a defence growth supercycle and that's an area in which the UK is very skilled."

The AIC's top ten investment trusts for defense exposure are listed below.

Factsheets, trust reports, Morningstar, and theaic . co . uk are the sources. current information as of March 27, 25. AeroVironment Inc., Airbus SE, Babcock International Group, BAE Systems, Boeing Co., Chemring Group, Dassault Aviation SA, GE Aerospace, General Dynamics +C7Corp, Howmet Aerospace, L3Harris Technologies, Leonardo DRS, Lockheed Martin, Northrop GruMman, Palantir Technologies, QinetiQ Group, Rheinmetall AG, Rolls-Royce Holdings, RTX Corp, Safran, Textron, Thales, and TransDigm Group are among the companies highlighted.

The best ETFs for European defense.

To increase their exposure to defense stocks, investors can choose from a variety of exchange-traded funds (ETFs).

Van Eck Defense UCITS ETF (LON:DFNS) is one of these; it tracks the MarketVector Global Defense Industry index. Trustnet claims that when it debuted in March 2023, it was the first defense-focused ETF available to European investors.

HANetf's Future of Defence UCITS ETF (LON:NATO) is a more recent addition. Since its launch in July 2023, this fund has grown its assets under management (AUM) by 700 million by 2025, surpassing 10.5 billion in March.

Co-founder and co-CEO of HANetf Hector McNeil says, "The ETFs NATO screen sets it apart from its peers, ensuring that investors are gaining exposure to NATO and NATO+ ally domiciled defense companies, while avoiding companies operating in countries that could one day be adversaries to the alliance." According to him, NATO is "truly unique" among defense funds because of this screen.

With investors flocking to the fund this year, HANetf has announced plans to launch a fund dedicated to European defense, building on the success of NATO. Although it will also weed out businesses with significant revenue exposure to contentious weapons, it will otherwise take a similar approach to the NATO fund.

"We think it is our responsibility as a proudly European ETF company to encourage investment in the European defense industry since effective capital markets will enable European champions to increase their capabilities much more effectively," says McNeil.