When choosing between the iShares U.S. Aerospace & Defense ETF (ITA) and the Tema Space Innovators ETF (NASA), investors might want to consider their priorities—whether they lean toward established mega-industries or are more interested in specialized space infrastructure and private technology.
Aerospace and defense investments typically blend stable government contracts with the high-stakes, high-reward potential of space exploration. One fund emphasizes the major contractors currently ruling the skies, while the other targets companies developing infrastructure for future space travel. This analysis looks at the different strategies regarding cost and risk.
Both funds aim at the aerospace sector, but from distinct perspectives. The iShares Fund tracks a market index comprised of established U.S. aviation and defense firms that form the industry’s backbone. Conversely, the Tema ETF is about fostering innovation in satellite communications, launch systems, and space-based data—stretching its reach across both global and emerging markets.
Let’s break it down a bit more:
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Expense Ratio: NASA has a fee of 0.75%, while ITA is more budget-friendly at 0.38%. This difference can significantly influence long-term total returns, particularly for those looking for broad exposure without diving into the expenses of active management or specialized innovation.
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Portfolio Size: ITA has about $14.2 billion in assets, whereas NASA sits at $2.3 billion.
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One-Year Returns: As for returns, ITA offers 33.7% compared to NASA’s 29.7%—not a huge gap, but still worth noting.
ITA, having been around since 2006, focuses heavily on traditional aerospace and defense elements with 49 holdings. Its biggest stakes include General Electric, RTX, and Boeing. It provides a trailing dividend yield with a payout of $1.06 per share, concentrating on domestic defense and civil aviation sectors.
On the other hand, NASA is relatively new, launched this year. Its largest position is 10.6% in SpaceX, followed by EchoStar and Rocket Lab. Notably, the Tema fund does not pay dividends and includes a variety of holdings that span different geographies and market caps. Its portfolio features privately placed and illiquid securities aimed at capturing advancements in satellite systems and propulsion technology.
In terms of insights for potential investors, here’s a quick summary:
- ITA: Established player, primarily focused on known public companies and provides dividends.
- NASA: The newcomer, involving a blend of private and public investments, and no dividend payouts.
ITA has shown solid performance over the last five years, increasing by 121%, which is notably better than the S&P 500’s approximate 80% return. However, NASA’s performance is still in the early stages, making it a more speculative choice.
So, how much risk are you comfortable with? For those who enjoy a little spicy investment, NASA might have appeal—though I’d personally advise keeping such positions small. Despite ITA appearing a tad more conservative, there’s a concentration risk worth noting: the top three holdings constitute nearly half of the portfolio, and the top ten make up 75%. This level of concentration makes me a bit uneasy. I prefer to think of my risk tolerance as more “mayonnaise” than “ghost pepper.”
