Market uncertainty is more than just Fed or domestic policy related; often, geopolitics can have an even bigger impact on the fate of the markets than either of those factors. While not as severe as the impact left on the world by the pandemic, the threat of war also looms. For Europe, in particular, concern is growing about a potential conflict with Russia. That has European nations looking at options to rearm, with this Europe ETF focused on those areas.
EUAD, the Select STOXX Europe Aerospace & Defense ETF, charges a 50 basis point (bps) fee to track the STOXX Europe TMI / Aerospace & Defense index. The fund tracks an index of ADRs of European-based firms deriving significant revenues from those aforementioned industries. Specifically, the fund looks to firms in areas like service, manufacturing, supply and distribution, hardware, components, software, and more. In addition, the strategy’s managers look to firms that directly support civil or military defense.
That has helped EUAD provide scorching hot YTD returns. According to ETF Database data, the Europe ETF has returned 71.3% since the start of 2025. Since launching in October 2024, EUAD has picked up more than $1 billion in AUM. It has added just under $900 million in net inflows since mid December last year, as well.
What is the fund’s outlook in the new year, then? The E.U.’s Security Action for Europe (SAFE) program was announced this year as part of an effort to prepare the continent for potential conflict. The program provides up to €150 billion to member states in long maturity loans to finance defense system procurement.
As tensions continue to grow, Europe will continue to rearm, in turn. That geopolitical tension may harm other equities, so diversifying into defense could prove a shrewd option. For those looking to play that theme as twist on a standard Europe ETF, EUAD may be worth watching.
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