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European Defense ETFs are the Break Out Theme of 2025 · Trillions

• 0:06
  Speaker 1: What come Antrilliance.
• 0:06
  Speaker 2: I'm Joel Webber and I'm Eric bel Cheers.
• 0:13
  Speaker 3: Eric, you're in London this week and I was just there.
• 0:17
  Speaker 3: But we're going to have an episode where we're going
• 0:20
  Speaker 3: to talk about one of the big themes I think
• 0:22
  Speaker 3: in Europe in the world right now. But maybe you've
• 0:26
  Speaker 3: noticed Donald Trump, president of the US, changing a few
• 0:29
  Speaker 3: things in a strategic importance and how Europe defends itself
• 0:35
  Speaker 3: is going to be a really interesting area to watch.
• 0:38
  Speaker 3: NATO obviously the bedrock of sort of this transit Atlantic
• 0:42
  Speaker 3: alliance that is really created stability, geopolitical stability in the
• 0:46
  Speaker 3: world for sixty plus years, but there's some big questions
• 0:50
  Speaker 3: about what Europe can do on its own. And of
• 0:53
  Speaker 3: course there's an ETF specifically geared at defense in Europe
• 1:00
  Speaker 3: that's that product.
• 1:01
  Speaker 2: Yeah, it's a really great product story and marketplace story
• 1:04
  Speaker 2: as well, because when you have thematic ETFs, sometimes you
• 1:08
  Speaker 2: don't know when your number is going to come up.
• 1:10
  Speaker 2: And European defense, I mean almost seems like an oxymoron,
• 1:13
  Speaker 2: not quite that far, but it was like, why would
• 1:15
  Speaker 2: I buy that?
• 1:16
  Speaker 1: Right?
• 1:16
  Speaker 2: All of a sudden, it's a hot area because they're
• 1:19
  Speaker 2: scrambling to get more better defense, and so all that
• 1:23
  Speaker 2: money is people front running the stocks. So there's an
• 1:26
  Speaker 2: ETF in the United States from Tuttle that already has
• 1:29
  Speaker 2: close to a billion dollars within a year, which is unbelievable.
• 1:33
  Speaker 2: And then I was in Paris and we had a
• 1:35
  Speaker 2: round table with some French issuers and they were all
• 1:38
  Speaker 2: talking about this mad scramble to launch homegrown European defense
• 1:42
  Speaker 2: ETF because the one here is a big hit. So
• 1:44
  Speaker 2: kind of reminds me of like couple themes in years
• 1:48
  Speaker 2: past where something would happen in the news and the
• 1:51
  Speaker 2: whole industry would just like scramble to meet the moment.
• 1:54
  Speaker 2: And that's what you have here with this.
• 1:56
  Speaker 3: And joining us to talk through European Defense ETFs.
• 2:00
  Speaker 1: It's going to be Henry Jim, an ETF analyst with.
• 2:03
  Speaker 3: Bloomberg Intelligence, this time on trillions Defense Defense.
• 2:12
  Speaker 1: Henry, welcome back to Trillions.
• 2:14
  Speaker 4: Thank you, great to be here.
• 2:16
  Speaker 1: Okay, so give us a vibe check.
• 2:18
  Speaker 3: How interesting is this space having you know, kind of
• 2:23
  Speaker 3: been a sleepy one for a long time.
• 2:26
  Speaker 4: Well, I don't know about sleepy. It just sort of
• 2:28
  Speaker 4: like jumped onto the stage. I've been in ETS for
• 2:31
  Speaker 4: a couple of decades. Now, this is probably one of
• 2:33
  Speaker 4: the biggest launches I've seen. The product question is the Woods'
• 2:37
  Speaker 4: Tree European Defense ETF WDF. It launched in March and
• 2:43
  Speaker 4: it's already gathered two point five billion euros. That's almost
• 2:45
  Speaker 4: three billion dollars, which I've never seen anything here in
• 2:49
  Speaker 4: Europe since I've been covering it.
• 2:51
  Speaker 2: That's US equivalent like ten billion. I mean, that's such
• 2:54
  Speaker 2: a big amount of money for that. And obviously Trump
• 2:58
  Speaker 2: was elected in jet in November, he started to rough
• 3:02
  Speaker 2: things up on the NATO front like a couple months.
• 3:04
  Speaker 1: After having already done that in his first term.
• 3:07
  Speaker 2: True, well, what did the Wisdom Tree file right before
• 3:10
  Speaker 2: he was How did like, did they foresee this? You think?
• 3:13
  Speaker 4: I'm sure they did. I mean, I don't know exact
• 3:15
  Speaker 4: timeline when they filed, but it takes about three to
• 3:18
  Speaker 4: four months launch. So if they launched in March, they
• 3:20
  Speaker 4: must have filed like back in November.
• 3:22
  Speaker 2: Probably right when he won. They launched, and they had
• 3:24
  Speaker 2: the they have that market to themselves basically or uh kind.
• 3:28
  Speaker 4: Of no, as soon as they launched, I think within
• 3:32
  Speaker 4: the the first month or so. The first ones came
• 3:35
  Speaker 4: right after them. So now we have seven seven European
• 3:39
  Speaker 4: defense ETFs in less than two and a half months.
• 3:42
  Speaker 1: So just let's stick with w DEF for a moment.
• 3:47
  Speaker 3: What did you know, What were they able to put
• 3:50
  Speaker 3: in this fund that got people excited?
• 3:53
  Speaker 4: Oh well, it's an index tracker. To be honest, I
• 3:58
  Speaker 4: don't think it's exactly what they put into it. It's
• 4:00
  Speaker 4: still exposure. But the spolure looks pretty equitable, if not diversified.
• 4:06
  Speaker 4: You got like the top holding is a German company
• 4:08
  Speaker 4: that specialized in contract defense contracting. The top country represented France,
• 4:17
  Speaker 4: the second is UK and the second top holding is
• 4:20
  Speaker 4: the Italian company called Leernardo SPA, also one of the
• 4:24
  Speaker 4: world's largest defense contractors. So actually I think it's just exposure,
• 4:29
  Speaker 4: not particularly what it is. They just had a whole
• 4:32
  Speaker 4: smattering of European defense companies and it's a it's self interingxing,
• 4:36
  Speaker 4: so they developed their own deck so they had control
• 4:38
  Speaker 4: over what goes in at any time as well.
• 4:41
  Speaker 3: So, Eric, when you think about a category like this
• 4:43
  Speaker 3: and you have an early mover like this, and how
• 4:46
  Speaker 3: are people going to try and distinguish their products if
• 4:48
  Speaker 3: there's going to be you know, seven plus of these things.
• 4:52
  Speaker 2: Yeah, they'll they'll mix it up a little bit. You
• 4:54
  Speaker 2: see some names in most of them. I mean, I'll
• 4:58
  Speaker 2: be honest, I don't recognize a lot of these European names.
• 5:00
  Speaker 2: I mean, the one had the name SPA and I
• 5:02
  Speaker 2: thought it was like for vacations, but apparently that's what's
• 5:06
  Speaker 2: that Italian word for what for ink? Yeah, anyway, I'm
• 5:11
  Speaker 2: way out on my def's child. But anyway, these companies
• 5:13
  Speaker 2: are within this theme. Some will equal weight it, some
• 5:16
  Speaker 2: will modify equal weight it. That will change the volatility.
• 5:20
  Speaker 2: Some will be cheaper, some came on try to be
• 5:22
  Speaker 2: able to will be the low cost one. It's like
• 5:24
  Speaker 2: the way a category plays out over the course of
• 5:26
  Speaker 2: like three years. This category played out in the course
• 5:29
  Speaker 2: of like three months, with everybody trying to angle a
• 5:32
  Speaker 2: little differently. But it really is a story of first
• 5:35
  Speaker 2: to market. And this is why we talk about first
• 5:37
  Speaker 2: market is so important and why people file stuff that
• 5:40
  Speaker 2: seems a little crazy or ahead of its time, because
• 5:43
  Speaker 2: if you are first to market and you hit it
• 5:45
  Speaker 2: right at the right time, it's really tough for any
• 5:48
  Speaker 2: competitor to eat into your assets, even if they do
• 5:53
  Speaker 2: have better performance, better costs. Right are you finding that here.
• 5:57
  Speaker 2: What percent of the total europe defense theme does the
• 6:02
  Speaker 2: wisdom Tree one have?
• 6:04
  Speaker 4: Oh well, currently it's ninety ninety three. Yeah. I think
• 6:07
  Speaker 4: a comparable is the van Neck brought it to launch
• 6:10
  Speaker 4: three years ago. It was a global defense CTF and
• 6:12
  Speaker 4: that was shortly after the conflict in Ukraine. They still
• 6:17
  Speaker 4: hold sixty seven percent of the market share, and I
• 6:22
  Speaker 4: don't know, nobody really.
• 6:23
  Speaker 1: Saw it coming.
• 6:24
  Speaker 4: So the first ones that launched were months or years after,
• 6:26
  Speaker 4: and they haven't been able to dent into their market share.
• 6:29
  Speaker 4: They've tried lowering their costs, they've tried going active. It's
• 6:32
  Speaker 4: to no avail.
• 6:33
  Speaker 1: Yeah, it is so crucial.
• 6:36
  Speaker 2: And the Vanik one is global, so you can see
• 6:38
  Speaker 2: why they launched that because there is a there's a
• 6:40
  Speaker 2: couple of global in the US, but it was it's
• 6:43
  Speaker 2: the European part of that that's powering it. And then
• 6:46
  Speaker 2: Wisdom Tree was European specifically in the US.
• 6:49
  Speaker 1: Droll you know.
• 6:50
  Speaker 2: Tuttle, Matt Tuttle, We've had him on the show a
• 6:51
  Speaker 2: couple of times. He actually filed and launched the only
• 6:56
  Speaker 2: European defense ETF in the US. EUA D is the
• 6:59
  Speaker 2: ticker and get this it came out in October twenty
• 7:03
  Speaker 2: twenty four, so I actually I beat him today and
• 7:06
  Speaker 2: I asked them if he totally foresaw all this happening.
• 7:10
  Speaker 2: He came out before the election, so he had to picture, Okay,
• 7:13
  Speaker 2: Trump one would do this thing and the stocks would
• 7:16
  Speaker 2: go up.
• 7:16
  Speaker 1: I was like, that's a lot.
• 7:17
  Speaker 2: That's getting a lot, right, and he goes, well, the
• 7:18
  Speaker 2: way I saw it was if Trump won, this would happen.
• 7:22
  Speaker 2: But if Harris won, Russia would invade Europe. So he
• 7:28
  Speaker 2: thought that would happen on the other side. Either way,
• 7:30
  Speaker 2: these stocks are going up. So this is part of
• 7:33
  Speaker 2: why ETF issuers in a way or kind of like
• 7:36
  Speaker 2: active managers, they're just not betting on their own fund.
• 7:39
  Speaker 2: They're betting in the marketplace that this thing will happen,
• 7:42
  Speaker 2: and it could happen. And he struck, old, Joel, this
• 7:45
  Speaker 2: is not you know, almost a billion dollars. It is
• 7:48
  Speaker 2: up sixty percent in I guess since October whatever, that
• 7:52
  Speaker 2: would be eight months or so. Unbelievable, just perfect timing.
• 7:56
  Speaker 2: I mean, it's a it's a case study for the
• 7:59
  Speaker 2: Etfhittree books.
• 8:01
  Speaker 3: So real, Like we've talked about this before, like hack
• 8:04
  Speaker 3: being one of the great launches, and it happened to
• 8:06
  Speaker 3: be their right place right time.
• 8:08
  Speaker 1: Is this the new hack? Are we going to talk
• 8:10
  Speaker 1: about eu A d as hack.
• 8:14
  Speaker 2: Hack junior hack? It need to get to about two
• 8:18
  Speaker 2: billion before we go. It's a new hack, but it's
• 8:21
  Speaker 2: well on its way. I mean again hack. I believe
• 8:24
  Speaker 2: it took a couple of years to get that amount,
• 8:25
  Speaker 2: but this is very similar to that. I would say
• 8:29
  Speaker 2: the robotics CTF robo was pretty similar. There's just been
• 8:33
  Speaker 2: a couple of these moments where I issue. Are times
• 8:35
  Speaker 2: it perfectly on the flip side. There's times where it
• 8:38
  Speaker 2: gets timed exactly the opposite and nobody cares. So it's
• 8:42
  Speaker 2: interesting to highlight these things. And that's why troll. You know,
• 8:46
  Speaker 2: you've got to put your line in the water before
• 8:48
  Speaker 2: the fish come. You know, these other issuers are coming
• 8:52
  Speaker 2: after the fish already ate and they're swimming off to
• 8:55
  Speaker 2: the other side.
• 8:55
  Speaker 1: Of the line. It's too late.
• 8:56
  Speaker 2: It's just like, you know, it is a big I
• 9:00
  Speaker 2: like fishing. So the metaphors is pretty good. And gotta
• 9:03
  Speaker 2: ya Vanak and Wisdom Tree to a degree, they were
• 9:07
  Speaker 2: just early with their lines in the water, with the
• 9:08
  Speaker 2: right bait, Okay, so.
• 9:16
  Speaker 3: What about where these things end up being listed? The
• 9:19
  Speaker 3: filings that you mentioned, are those all US filings?
• 9:23
  Speaker 2: No, the ones Henry mentioned are all already on the
• 9:25
  Speaker 2: market in Europe.
• 9:27
  Speaker 1: So they are all all there.
• 9:28
  Speaker 3: And now you know if titles in the US, like,
• 9:32
  Speaker 3: is the US the place for this or is it
• 9:33
  Speaker 3: going to be in the in Europe that's going to
• 9:35
  Speaker 3: attract the assets or is it just going to be
• 9:37
  Speaker 3: performance chasing?
• 9:38
  Speaker 4: I think well, for Forman, I think there's still a
• 9:41
  Speaker 4: long way to go. I mean, these military expenditures are
• 9:44
  Speaker 4: a multi year cycles, right, I think it's just starting.
• 9:46
  Speaker 4: And then the the EU has what do they call it,
• 9:49
  Speaker 4: the re Armed Europe Plan. They announced early March and
• 9:53
  Speaker 4: then wasn't she was actually kind of late because they
• 9:55
  Speaker 4: launched in the middle of March. But I see, I
• 9:57
  Speaker 4: see how much do they commit hundred billion? I think
• 10:01
  Speaker 4: over whatever timeline is, it's still a lot and it's
• 10:04
  Speaker 4: a multi year cycle. So so for the local ones,
• 10:07
  Speaker 4: I would say, yes, you would, you would the place
• 10:10
  Speaker 4: to be would be in Europe. I'm surprised there haven't
• 10:13
  Speaker 4: been more launches in the US to Yeah.
• 10:16
  Speaker 2: I believe there's one filed. I forget from who, But
• 10:18
  Speaker 2: it hasn't been the frenzy that it has in in Europe.
• 10:21
  Speaker 2: But Joel Henry vumright, there's a total of four million
• 10:26
  Speaker 2: between all.
• 10:26
  Speaker 4: Of them, four billion what in the European defense, and
• 10:31
  Speaker 4: it was like two point six pos. So you add
• 10:32
  Speaker 4: the global and if you had the globals like eleven
• 10:35
  Speaker 4: eleven billion.
• 10:36
  Speaker 2: So two billion in europe European defense and only one
• 10:41
  Speaker 2: billion in US European defense. That's really astonishing because normally
• 10:46
  Speaker 2: the US, it just has a bigger pool of money,
• 10:48
  Speaker 2: so whatever is popping, we will lead in assets. But
• 10:52
  Speaker 2: this is the rare case where Europe is possibly because
• 10:55
  Speaker 2: the investors here are closer to that news.
• 10:58
  Speaker 3: Why do you think that is? Why? Why would there
• 11:00
  Speaker 3: be this much more interests?
• 11:03
  Speaker 4: Well, besides the home bias, there might be some links
• 11:08
  Speaker 4: with the European Commission, so there might be some mandates
• 11:11
  Speaker 4: for your institutional investors to invest in European defense stocks
• 11:15
  Speaker 4: and this is the best way to do it, So
• 11:17
  Speaker 4: there might be that aspect to it too.
• 11:19
  Speaker 2: Also, Europe's having a pretty good year overall. They're up,
• 11:21
  Speaker 2: the main indexes are up like twenty three percent, twenty
• 11:25
  Speaker 2: five percent, So I think it's got the attention of investors.
• 11:28
  Speaker 2: But this is updouble that, you know. So this is
• 11:31
  Speaker 2: like a shiny object within other shiny object. It's like
• 11:34
  Speaker 2: the shiniest of the shiny. The other thing is the
• 11:37
  Speaker 2: thing with themes is and even sectors and industries is
• 11:41
  Speaker 2: sometimes these industries get so beat up and left for dead.
• 11:45
  Speaker 2: It doesn't take much to go up sixty percent. You
• 11:48
  Speaker 2: only need a little. And this is where I give
• 11:50
  Speaker 2: total credit because it reminds me of the uranium ETF
• 11:52
  Speaker 2: that was filed after a ten year bear market. Most
• 11:55
  Speaker 2: issuers file after again, they're they're chasing the fish. Rarely
• 12:00
  Speaker 2: does somebody put their line in the water where nobody's
• 12:02
  Speaker 2: there and everybody's like left the area. It takes some
• 12:06
  Speaker 2: guts and maybe some vision, but that's how you can
• 12:09
  Speaker 2: catch a nice run, and then you can also be first.
• 12:14
  Speaker 2: And so I would think more issuers would try to
• 12:16
  Speaker 2: find spots that have been beaten up, left for dead
• 12:19
  Speaker 2: and nobody cares about, versus being the eighth European Defense
• 12:22
  Speaker 2: ETF and trying to get like a crumb. But I
• 12:26
  Speaker 2: think these issuers are going on the road, they're talking
• 12:28
  Speaker 2: to advisors, and I think the grassroots ask for these
• 12:33
  Speaker 2: ETFs is there, so like, hey, they're calling the home
• 12:35
  Speaker 2: office and saying, we actually need it. I gotta recommend
• 12:38
  Speaker 2: Wisdom Trees or we have to launch one.
• 12:40
  Speaker 4: Yeah, and totally agree. I think it's also now a
• 12:43
  Speaker 4: initial of distribution. For example, BMP Piry BUSS came in
• 12:46
  Speaker 4: at number six five or six actually tracking at Bloomberg
• 12:50
  Speaker 4: European Defense in the decks end, they've got a forty
• 12:52
  Speaker 4: four million, which is astounding. They're the second large authority,
• 12:55
  Speaker 4: so that must be either internal assets or through their
• 13:00
  Speaker 4: local brick and mortar distribution, right, So it's going to
• 13:03
  Speaker 4: be all about distribution. Now, Wisdom treat does not have
• 13:06
  Speaker 4: physical distribution, and they've already gathered two point five billion euros.
• 13:09
  Speaker 4: So yeah, I think I think it's going to be
• 13:12
  Speaker 4: a hand to hand combat on the distribution side.
• 13:15
  Speaker 2: Now, you like Joel, if you black Rock, If black
• 13:18
  Speaker 2: Rock launched one right now, I bet they would get
• 13:21
  Speaker 2: theirs even if the Tuttle one is out. That's I
• 13:25
  Speaker 2: think that's the point with BNP here. Some firms are
• 13:27
  Speaker 2: just so big and powerful they're just going to get theirs.
• 13:30
  Speaker 2: But the mid ones and the small ones, if they're
• 13:32
  Speaker 2: like third or fourth. They're almost like dead dead in
• 13:34
  Speaker 2: the water.
• 13:36
  Speaker 3: So and Henry we talked a little bit about the
• 13:39
  Speaker 3: companies earlier. Are there any high flyers in here that
• 13:42
  Speaker 3: that are pretty ularly interesting, especially since this is, you know,
• 13:46
  Speaker 3: a category that's going to be investing in many of
• 13:48
  Speaker 3: the same companies.
• 13:49
  Speaker 4: Well, they're all pretty interesting. I'm even Ryan Mattau. The
• 13:53
  Speaker 4: top holding from Germany, it's mixed up. I think fifteen
• 13:56
  Speaker 4: percent of the fund you're to date it's returned fifty percent.
• 14:02
  Speaker 4: And the top the top performing company was Rank an
• 14:06
  Speaker 4: armored vehicles company, also from Germany. It's returned ninety nine
• 14:11
  Speaker 4: percent since since March.
• 14:14
  Speaker 2: Imagine being that company and you're like making your tanks
• 14:17
  Speaker 2: and like you're like, uh, another day at the office,
• 14:21
  Speaker 2: and like you read the news and the phone starts
• 14:24
  Speaker 2: ringing and you're like, oh my god, we don't have
• 14:26
  Speaker 2: enough people. That seems like what happened right.
• 14:31
  Speaker 4: Like and it's it's really bringing Europe together because the
• 14:35
  Speaker 4: third largest holding is actually BAE that's British Aerospace something
• 14:39
  Speaker 4: Systems Holdings, So they're there even though the UK is
• 14:43
  Speaker 4: no longer part of the European Union. To just doll
• 14:44
  Speaker 4: part of Europe and they're they're.
• 14:46
  Speaker 1: Willing to spend up for twelve percent.
• 14:48
  Speaker 3: Which is I think ultimately what this goes back to
• 14:50
  Speaker 3: is sort of where we're talking at the beginning, Henry,
• 14:53
  Speaker 3: of like, if if NATO and countries are willing to
• 14:57
  Speaker 3: like really invest in these companies, then this actor, which
• 15:01
  Speaker 3: you know, maybe maybe was pretty sleeping quiet for.
• 15:03
  Speaker 1: A long time, suddenly there's a lot of appetite.
• 15:07
  Speaker 4: Yeah, and these are these aren't even two three year cycles,
• 15:10
  Speaker 4: not even five years. If we're talking ten to twenty
• 15:12
  Speaker 4: year cycles. Right once you put the contract in, it
• 15:14
  Speaker 4: takes time to plan and to develop and then to
• 15:17
  Speaker 4: launch a deploy right.
• 15:20
  Speaker 3: Well, Henry, as long as we have you here, I
• 15:22
  Speaker 3: want to ask you, you know, what's it feel like
• 15:24
  Speaker 3: to be beating the US up for once?
• 15:28
  Speaker 4: If it's good.
• 15:31
  Speaker 2: That you're German?
• 15:32
  Speaker 3: I'm trying to Yeah, you know, look, Henry, it's taken
• 15:35
  Speaker 3: forever to get to a point where Europe is outperforming
• 15:39
  Speaker 3: the US this year. And I know how Eric feels
• 15:43
  Speaker 3: about this, but I want to I want to hear
• 15:45
  Speaker 3: it from you. How do you how do you talk
• 15:46
  Speaker 3: to Eric about why Europe is different this time?
• 15:52
  Speaker 4: Just look at the flows. I think Europeans are just
• 15:56
  Speaker 4: just had enough of putting their money all into into
• 15:58
  Speaker 4: the US. I think put massive amounts of money from
• 16:02
  Speaker 4: November all the way with you to March, and then
• 16:04
  Speaker 4: suddenly when terrors it, they just say, okay, wait, wait
• 16:07
  Speaker 4: a minute, what's going on? So you see a reverse
• 16:09
  Speaker 4: out of US ETF focus ETFs in April or after terrors,
• 16:16
  Speaker 4: and they're saying, well, we better get our cash back,
• 16:18
  Speaker 4: you know, back to our own countries.
• 16:20
  Speaker 1: Now.
• 16:20
  Speaker 2: Yeah, normally they invest half their money here, but this
• 16:24
  Speaker 2: year they've invested only three percent. That said, they better
• 16:28
  Speaker 2: get back on the train because the SMP has left
• 16:30
  Speaker 2: the station.
• 16:31
  Speaker 1: Baby. That's right, all right, we'll leave it there.
• 16:34
  Speaker 3: Henry, thanks so much for joining us on Trillions. Thank you,
• 16:42
  Speaker 3: thanks for listening to Trillions until next time. You can
• 16:45
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  Speaker 3: Joel Weber Show, He's at Eric Balcina's. Trillions is produced
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  Speaker 3: Bauman is the head of Bloomberg Podcast.