The Artemis II mission was a glorious moment for space exploration and a sign of a potential $1 trillion investment boom in the global space industry over the next decade.
More companies than ever stand to benefit from the growing number of objects being launched into orbit. Analysts at Morgan Stanley identified 60 companies poised to profit from the expanding space economy, including miners, fuel producers and manufacturers of industrial gases and propulsion systems.
“Space is back in a big way,” the analysts wrote in their report titled “The Space 60: Picks & Shovels for the Final Frontier.”
While NASA doesn’t expect to return humans to the moon until 2028, the US Space Force has awarded contracts worth as much as $3.2 billion to a dozen companies to develop prototypes for space-based missile interceptors under President Donald Trump’s “Golden Dome” defense plan. Bloomberg Intelligence analysts Wayne Sanders and George Ferguson say the global space defense market may reach $1 trillion by 2035.
And of course, there’s Elon Musk’s rocketry and satellite company SpaceX, which won one of the aforementioned contracts. The dominant player in the sector is expected to go public later this year, targeting a valuation of more than $2 trillion in what is arguably the most hotly anticipated mega-IPO in a year that promises several of them.
“Space has moved decisively from being a speculative frontier to a strategically vital, revenue generating investment theme,” said Mark Boggett, chief executive officer of Seraphim Space Investment Trust, whose holdings include Finnish satellite company ICEYE.
So how can you get exposure to space in your portfolio? At some point, there may be a thriving interplanetary leisure sector, and penny-stock asteroid miners for risk-loving investors. For now, as Jason Hollands, managing director at Bestinvest, puts it: “Investing in space is less about betting on moonshots and more about backing the ecosystem of satellites, data and communications that increasingly underpin the modern economy.”
Just Buy the Company
The most obvious play here is SpaceX itself. You could wait for the IPO and see how it all shakes out, but if you would like to get exposure prior to the company going public, there are indirect ways to do so.
For example, Hollands pointed out that SpaceX was the biggest holding in London-listed investment trust (closed-end fund) Scottish Mortgage Investment Trust (Ticker: SMT@LN), accounting for a fifth of its net asset value at the end of March. It’s not a pure play, obviously, but it’s certainly more convenient and accessible than trying to get your hands on a hot unlisted stock via the private market. The fund has gained 22% this year, posting a return that far exceeds global market benchmarks.
Other UK-based funds with sizable investments in SpaceX include Edinburgh Worldwide Investment Trust (EWI@LN) and Baillie Gifford US Growth (USA@LN), according to the Association of Investment Companies. Be mindful that these actively-managed funds charge management fees equal to anywhere from 0.3% to 0.85% of assets invested.
For investors who favor a US option, check out this Bloomberg piece from earlier this year, which lists a number of US funds from providers such as Ark Invest and Baron Capital that hold significant stakes in SpaceX. Obviously, investors should do their own research and consider the other holdings in these funds before investing.
Buy the Sector
Another option, says Hollands, is to go for a sector tracker. The London-listed VanEck Space Innovators UCITS ETF (JEDI@LN) tracks the MarketVector Global Space Industry Screened Index, which covers around 25 to 30 companies involved in space. “These include satellite operators, launch providers and enabling technologies, so it’s really about the infrastructure underpinning the space economy.” Top holdings currently include satellite companies Planet Labs and Viasat Inc., and manufacturer Rocket Lab.
The VanEck fund has surged 47% since the start of the year, slightly underperforming the 49% advance of the MarketVector index. The ETF has a total expense ratio of 0.55%.
Go the Venture Route
Finally, if you’re looking for a fund that invests much of its money in non-public companies, there’s the London-listed Seraphim Space Investment Trust (SSIT@LN). This closed-end fund “takes a venture capital-style approach, investing heavily in private early-stage businesses,” according to Hollands.
As such, it does not invest in SpaceX. Rather, the largest holding in this highly concentrated portfolio (it has 24 holdings in total) is ICEYE, which last year formed a joint venture with Rheinmetall AG to work on providing Germany’s armed forces with space-based reconnaissance data. The trust has ongoing charges of 1.77%, so it’s by no means cheap, though this does reflect its specialist nature.
One point of caution, of course: This is a hot sector right now, and it has enjoyed a strong run. The Seraphim fund trades at a large premium to its net asset value (the value of the underlying portfolio) and is in the process of raising fresh funds (up to £350 million) from investors, while the Van Eck ETF has practically tripled in the last year. So be sure to do your research and perhaps consider these as options for adding to your watchlist.
Stepek writes for Bloomberg.
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