This publication recently spoke with managers of a defence and space fund about investment opportunities in Europe, heard views from bankers and also delved into the background of why these sectors remain important, and what the future holds.

When Russian forces invaded Ukraine in 2022, a "vibe shift" upended the way people evaluate ethical investing, which is still playing out today. It has put defence stocks into wealth managers’ asset allocations.

On a separate but related front, space tech is an increasingly important theme, given fresh impetus by the SpaceX IPO on 12 June. Rockets, satellites, launch facilities and associated engineering are growing sectors. They are hungry for capital.

Rising defence spending in the US, Europe, Asia and other regions is part of the reason why wealth and asset managers are getting involved. For example, BNP Paribas Asset Management launched the BNP Paribas Europe Strategic Autonomy fund in June last year; in March 2025, WisdomTree launched a new exchange-traded fund: The WisdomTree Europe Defence UCITS ETF (WDEF), listed on Börse Xetra, Borsa Italiana and the London Stock Exchange.

One factor to bear in mind is stock valuations. Carmignac, the Paris-based asset manager, told WealthBriefing in a recent meeting that defence equity stocks are relatively rich in valuation.

Even so, for investors with expertise, there are opportunities. The Finserve Global Defence and Security Fund, which is an actively managed equity fund with global exposure and a focus on defence, cybersecurity and space, is an example of the kind of investment portfolio at work. This is a Luxembourg UCITS fund structure. Finserve Nordic AB is a mutual fund company and authorised manager with headquarters in Stockholm. Sweden and its Scandinavian cousins, given their geographic position, are perhaps well suited to producing firms that grasp these matters.

“We were very early to see a shift in the geopolitical landscape,” Joakim Agerback, lead portfolio manager at the fund, told a briefing for journalists in London recently. 

“We are entering a very interesting phase for the defence sector. Companies are increasingly showing that they can convert record order books into higher production, stronger margins and, ultimately, better cash generation,” he also told WealthBriefing in a separate conversation. “Against that backdrop, the upcoming quarterly reports will be particularly interesting to follow, as they should provide further evidence of how effectively this conversion is progressing.” 

“The world is changing in a way that directly reinforces the three themes we invest in, namely defence, cyber and space – all of them defence domains. In Europe, defence material procurement could grow at around 16 per cent annually, double the amount of topline defence budget spending. With procurement taking a larger share of budgets and Europe increasingly prioritising sovereign supply chains, we believe the investment opportunity is underestimated,” Agerback said.

The fund
The fund, whichwas founded in 2019, fund invests in various firms by market capitalisation. It has an advisory board full of experts with impressive front-line military, spacefaring and technology experience. Examples include Ben Hodges, former Commanding General of US Army Europe, and a NATO advisor; Karl Engelbrektson, former Chief of the Swedish Army, and an EU and NATO representative, and Stefan Gustafsson, former Chief Strategist of the Swedish Space Corporation. 

The fund must have at least 50 per cent exposure to defence according to the prospectus, but the management team aims to have between 60-85 per cent. As regards space exposure, it could potentially be between 5 per cent and 25 per cent, but expected exposure is 5-15 per cent.

Prime defence contractors also have space exposure, so it compounds that with indirect exposure.

A challenge now for finding space- and defence-related opportunities in Europe, Agerback said, is national fragmentation, contrasting with the more unified US market. 

“We need to have more of an ecosystem of companies [in Europe] working together,” he said. 

Defence investment is an intensely “political” sector, with certain companies’ products and services subject to export controls to avoid know-how going astray. For example, the Finserve media briefing was told by Fredrik Ljungdahl, portfolio analyst, that Germany’s Rheinmetall, for example, is banned from doing business with China. 

Sustainability and ethics
Talk of restrictions raised the question among journalists about where sustainability fits into how Finserve runs the fund. Since April 2023 the fund has complied with article 8 in the Sustainable Finance Disclosure Regulation, which means it promotes social and governance characteristics but does not have sustainable investments as its main goal. Impact investors are among factors that the portfolio team considers, and certain opportunities are screened out.

Since its 21 February 2019 inception, the fund has chalked up returns of almost 206 per cent, according to the Finserve website, and the fund’s benchmark is the World Equity Index TR; the fund carries a 1.6 per cent management fee. It has experienced a standard deviation (measure of volatility) of 17.85 per cent, which appears to be around the long-term average for US equities, for example. 

Performance appears to be robust. Finserve’s presentation shows that the fund has outperformed in discrete historical periods. For example, in 2022, when Ukraine was invaded, it achieved 13 per cent outperformance. In 2023, the year of the attack on Israel on 7 October, the fund achieved a 12 per cent outperformance. The 2025 announcements in Germany and across Europe of major defence hikes saw the fund outperform by 22 per cent, and the 2026 military clashes between the US, Israel and Iran produced a 19 per cent positive gap.

In its top 10 holdings (source: Investing.com), the largest, at 3.70 per cent, is Rolls-Royce, followed by GE Aerospace, at 3.43 per cent. Other names include South Korea’s Hanwha Aerospace, Norway’s Kongsberg, at 3.3 per cent, and Singapore Tech Engineering, at 3.29 per cent. Others in that top 10 are Rtx Corp, Indra, Bittium, SAAB, and Howmet.

Space 
at the media briefing, WealthBriefing asked Gustafsson about where the space piece fits into the picture for Finserve.

“Space is a key enabler” for defence capabilities, he said, talking about the use of satellites for communications, warnings and data provision, for example. At present there’s a vast gap between the number of US-based rocket launches and those in Europe. The US conducted around 180 orbital launches in 2025, against eight from Europe (source: Aviation Week, 7 January 2026). “There is a huge difference between the US and European space launch [numbers], Gustafsson said. The US space sector is, at this time, more innovative and competitive, he continued. 

A rising tide
Entities such as the Finserve fund are being lifted by a rising tide of defence spending and space investment around the world. 

In early January, Weiheng Chen, global investment strategist at JP Morgan Private Bank, said defence spending moves “reflect a global shift toward prioritising security, supply chain integrity, and energy independence, with governments and investors alike recognising defence as a strategic imperative.” 

In Asia the region is expected (source, UBS, 28 April) to have raised its defence spending by 5.1 per cent year-on-year to $632 billion last year; China accounts for about half of total Asian outlays on defence. European NATO countries and Canada are expected to have spent a total of $559 billion, rising 16 per cent; the US alone is projected to have spent an added $845 billion, rising more modestly, at 1.7 per cent. 

UBS said in report that innovation is a major theme: “Increased spending is driving demand for advanced weapon systems, munitions, armoured vehicles, missiles, radars, aircraft, drones, and warships. As digital and space domains become more contested, cybersecurity and space technology providers are growing in relevance. The civilian security sector is also seeing major beneficiaries in cybersecurity software vendors and managed security service providers, reflecting the importance of digital resilience.”

Space spending taps are opening fast. Public spending in space by the US this year is slated at about $60 billion for 2026; the European Space Agency in 2026 voted for €22.1 billion over 2026-28. European space budgets grew by 12 per cent to €13.5 billion, marking the first double-digit growth rate in five years, according to the Space Economy Institute in a 23 July report. Defence spending accounted for a large slice of this. On the private sector side, total investment is around $12.4 billion, rising 48 per cent on a year before, with the US accounting for about 60 per cent of the total (Source: Seraphim Space).

According to a report published on 22 July by the Space Foundation, a non-profit organisation, the global space economy, a broad term, reached $613 billion in 2024, representing 7.8 per cent year-on-year growth.

Running hot?
At Carmignac, Kevin Thozet, a member of the investment committee said the firm has one investment now, citing high valuations. 

“The defence cycle is back end loaded," he said. Defence companies earning expectations have surged after Germany’s and the EU’s recent hike in defence spending. "Valuations have gone through the roof. Defence stocks [are] like the energy transition stocks in 2021. It exploded and then deflates," Thozet said.  

The STOXX Europe Targeted Defence Index is a guide to performance of firms with defence exposure in Europe. It is weighted by how much of each company's revenue comes from defence. (Firms involved in controversial weapons or that fail ISS norms-based screening are excluded).

The iShares Europe Defence UCITS ETF tracks it, for example. After a big rise in 2025, gains haven't been sustained: the index is at 5,796.1 as of 1 October, a gain of 0.82 per cent year to date and down 8.29 per cent over 12 months. 

The iShares Europe Defence UCITS ETF has price/earnings ratio of 29.16 as of 29 September 2026.

Linkages
Finserve's Agerback talked about the space-defence links that are important.

“Modern defence capability increasingly depends on connectivity. A platform is only as effective as the network of sensors, communications, and intelligence around it. That makes space a natural extension of the defence investment case because it helps provide the surveillance, connectivity and situational awareness that allow those platforms to operate as an integrated system,” Agerback said. 

“Space is moving from supporting infrastructure to strategic infrastructure. Governments increasingly need resilient communications, surveillance, and positioning capabilities not only for conventional defence, but also to monitor activity below the threshold of open conflict,” he added.