European governments are entering a multi-year defence-investment cycle covering aircraft, air-defence systems, armoured vehicles, ammunition, drones, cybersecurity and military infrastructure. Defence ETFs provide diversified access to this trend—but their geographical exposure, concentration and valuations differ considerably.
Europe’s defence industry has moved from decades of restrained procurement to a period of accelerated investment.
In 2025, European NATO members and Canada increased defence expenditure by almost 20% from the previous year. Their combined spending reached more than $571 billion in constant 2021 dollars, equivalent to approximately 2.3% of their collective GDP. NATO’s latest defence-investment update confirms that this was up from only 1.4% of GDP in 2014.
The commitment extends well beyond one budget cycle. At NATO’s 2025 Hague Summit, members agreed to work towards spending 5% of GDP on defence and security by 2035:
- 3.5% for core military requirements;
- up to 1.5% for defence-related infrastructure, cybersecurity, resilience and industrial capacity.
The European Union is pursuing a parallel strategy. Its Readiness 2030 framework could facilitate up to €800 billion of additional defence expenditure, including as much as €650 billion of national fiscal flexibility and €150 billion of EU-backed SAFE loans. The European Commission identifies air defence, drones, ammunition, military mobility, cyber capabilities, space systems and ground combat among its priority areas.
The investment case is therefore structural. However, many defence shares already rose substantially in anticipation of higher orders. Investors must distinguish between growing government budgets and the price currently paid for defence-company earnings.
Best defence UCITS ETFs at a glance
| ETF | ISIN | Main exposure | TER | Holdings | Fund size* |
| WisdomTree Europe Defence UCITS ETF | IE0002Y8CX98 | European defence | 0.40% | At least 20 | $5.37bn |
| iShares Global Aerospace & Defence UCITS ETF | IE000U9ODG19 | Global developed markets | 0.35% | 78 | $1.82bn |
| VanEck Defense UCITS ETF | IE000YYE6WK5 | Global defence technology | 0.55% | At least 25 | $7.40bn |
| Future of Defence UCITS ETF | IE000OJ5TQP4 | NATO and allied countries | 0.49% | Diversified thematic portfolio | $3.26bn |
| Global X Europe Focused Defence Tech UCITS ETF | IE000WRQ9RR1 | European defence technology | 0.40% | 25 | €22.6m |
Approximate data reported by the fund providers in June or August 2026. Holdings, assets and fees can change.
1. WisdomTree Europe Defence UCITS ETF
Best for: concentrated exposure to the European rearmament cycle.
The WisdomTree Europe Defence UCITS ETF is the most direct option for investors who believe European military spending will grow faster than defence expenditure elsewhere.
Launched in March 2025, it follows the WisdomTree Europe Defence UCITS Index. The index selects European companies according to their defence-sector revenue exposure and applies minimum market-capitalisation and liquidity requirements.
As of 3 August 2026, the ETF reported:
- a 0.40% TER;
- approximately $5.37 billion in assets;
- an accumulating structure;
- a euro base currency;
- Irish domicile;
- at least 20 portfolio companies;
- semi-annual index rebalancing.
The fund’s rapid asset growth shows how strongly investors have embraced the European defence theme. WisdomTree’s official product page provides its current characteristics and methodology.
The portfolio may include companies active in:
- military aircraft;
- armoured vehicles;
- radar and defence electronics;
- missiles and ammunition;
- naval systems;
- engines and propulsion;
- secure communications;
- space-based defence.
Advantages
- Direct connection to rising European procurement;
- Lower fee than several competing thematic ETFs;
- Accumulating structure;
- Large asset base despite its short history;
- Excludes specified controversial weapons;
- Euro-denominated index and European-company focus.
Risks
- Considerable exposure to a single region and industry;
- Short operating history;
- Potential concentration in a relatively small group of major contractors;
- European defence shares may already reflect considerable spending growth;
- Government orders can be delayed by elections, procurement disputes or budget constraints.
Verdict
WisdomTree offers the clearest expression of the European defence-spending theme. It is arguably the best ETF for investors deliberately seeking European contractors rather than global aerospace exposure.
Its regional concentration makes it better suited to a satellite allocation than to the core of an equity portfolio.
2. iShares Global Aerospace & Defence UCITS ETF
Best for: lower-cost global diversification and established aerospace companies.
The iShares Global Aerospace & Defence UCITS ETF tracks the S&P Developed BMI Select Aerospace & Defence Capped Index.
Unlike a Europe-only fund, it combines European companies with major US and other developed-market aerospace and defence groups. The benchmark caps its largest constituents monthly to reduce excessive concentration.
The June 2026 factsheet reported:
- 78 holdings;
- a 0.35% TER;
- approximately $1.82 billion in assets;
- physical replication;
- accumulating income;
- Irish domicile;
- a February 2024 launch date.
The largest holdings included GE Aerospace, RTX, Boeing, Rolls-Royce, Airbus, Safran, Howmet Aerospace, General Dynamics and Lockheed Martin. Its ten largest positions represented approximately 58.7% of the portfolio.
The fund gained 54.55% in 2025 and 18.15% during the 12 months to June 2026 in US-dollar terms. Past performance does not predict future returns. The official iShares factsheet contains the complete portfolio and performance data.
Advantages
- Lowest TER among the principal global funds compared here;
- 78 holdings;
- Exposure to both US and European industry leaders;
- Accumulating structure;
- Large fund size;
- Monthly limits on the largest index weights.
Risks
- Less direct exposure to European rearmament;
- Significant US-dollar exposure;
- Includes commercial aerospace companies whose performance depends on civil aviation;
- Top-ten holdings still represent more than half the portfolio;
- Valuation was elevated, with a reported portfolio price-to-earnings ratio of 33.55 in June 2026.
Verdict
The iShares fund provides the best combination of low cost, fund size and global diversification. It may be preferable for investors who want broad aerospace-and-defence exposure without betting exclusively on European contractors.
Its civil-aerospace exposure can be either an advantage or a disadvantage, depending on the investor’s objective.
3. VanEck Defense UCITS ETF
Best for: global exposure to defence equipment, technology and cybersecurity.
The VanEck Defense UCITS ETF is one of Europe’s largest specialist defence funds.
Its underlying index targets companies generating meaningful revenue from:
- military equipment;
- defence technology;
- cybersecurity;
- communications systems;
- unmanned vehicles;
- defence-related services.
As of 3 August 2026, VanEck reported:
- approximately $7.4 billion in assets;
- a 0.55% TER;
- a March 2023 launch date;
- Irish domicile;
- physical replication;
- at least 25 constituents.
VanEck’s official fund page also states that the strategy applies controversial-weapons screening.
VanEck’s definition of defence is broader than conventional aircraft, tanks and shipbuilding. Cybersecurity and technology companies can receive meaningful allocations when they satisfy the index’s defence-revenue requirements.
Advantages
- Largest fund in this comparison;
- Established track record for a European defence ETF;
- Global rather than Europe-only exposure;
- Includes cybersecurity and unmanned technologies;
- Strong secondary-market presence;
- Screening of controversial weapons.
Risks
- Higher fee than WisdomTree, iShares and Global X EDEF;
- Relatively concentrated portfolio;
- Technology holdings may respond differently from traditional contractors;
- Global exposure dilutes the direct connection with European budgets;
- Strong historical performance may have increased valuation risk.
Verdict
VanEck is the strongest all-round option for investors seeking a broader concept of modern defence. Its exposure extends from military hardware to cybersecurity and autonomous systems.
The iShares fund is cheaper and more diversified by number of holdings, while WisdomTree provides purer European exposure.
4. Future of Defence UCITS ETF
Best for: defence and cybersecurity exposure limited to NATO and allied countries.
The Future of Defence UCITS ETF—often identified by its ticker NATO—tracks the EQM NATO+ Future of Defence Index.
The index focuses on companies headquartered in NATO or allied countries. Eligible businesses must generally derive more than 50% of revenue from military aircraft, defence equipment or qualifying cyber-defence activities.
As of 3 August 2026, HANetf reported:
- approximately $3.26 billion in assets;
- a 0.49% TER;
- physical replication;
- Irish domicile;
- a July 2023 launch date;
- US-dollar base currency;
- SFDR Article 6 classification.
The strategy’s cyber component is particularly relevant because NATO’s new spending framework extends beyond conventional military equipment to network protection and resilience. HANetf’s official product page provides the latest characteristics.
Advantages
- Focus on NATO and allied-country suppliers;
- Includes cyber-defence companies;
- More geographically diversified than a Europe-only ETF;
- Substantial fund size;
- Clear revenue-based eligibility threshold.
Risks
- Higher fee than WisdomTree and iShares;
- Does not provide pure European exposure;
- Cybersecurity companies can carry technology-sector valuation risk;
- “NATO” is the fund’s ticker, but the ETF is not affiliated with or guaranteed by the alliance;
- Ethical screens may differ from those applied by other funds.
Verdict
This ETF is attractive for investors who want exposure aligned with NATO and allied procurement rather than the complete global defence industry.
It occupies a useful middle ground between the Europe-focused WisdomTree fund and broader global aerospace portfolios.
5. Global X Europe Focused Defence Tech UCITS ETF
Best for: a smaller, technology-oriented European defence allocation.
The Global X Europe Focused Defence Tech UCITS ETF targets companies positioned to benefit from European military demand for:
- drones;
- radar;
- surveillance;
- artificial intelligence;
- cybersecurity;
- aircraft;
- military vehicles;
- advanced electronic systems.
The fund tracks the Mirae Asset Europe Defence Tech Index.
As of 3 August 2026, it reported:
- 25 holdings;
- a 0.40% TER;
- approximately €22.6 million in assets;
- an accumulating structure;
- full physical replication;
- Irish domicile;
- a May 2025 launch date.
Global X’s official product page shows that the fund returned –10.11% over the year to June 2026, illustrating that rising defence budgets do not make every defence ETF rise continuously.
Advantages
- Direct focus on European defence technology;
- Competitive 0.40% fee;
- Accumulating structure;
- Exposure to emerging military technologies;
- Different index construction from larger European competitors.
Risks
- Much smaller asset base;
- Greater fund-closure and liquidity risk;
- Only 25 holdings;
- Short history;
- Potentially wider trading spreads;
- Technology-oriented defence companies can be particularly volatile.
Verdict
Global X EDEF offers differentiated European technology exposure, but its small size makes it less compelling as a default choice than WisdomTree WDEF.
Investors interested in EDEF should use limit orders and examine its exchange liquidity carefully.
Which defence ETF looks best?
| Investor priority | Potentially most suitable ETF |
| Pure European defence exposure | WisdomTree Europe Defence |
| Lowest fee and broadest developed-market portfolio | iShares Global Aerospace & Defence |
| Global defence technology and cybersecurity | VanEck Defense |
| NATO and allied-country alignment | Future of Defence |
| Smaller European defence-tech companies | Global X Europe Focused Defence Tech |
| Largest fund | VanEck Defense |
| Accumulating euro-based European strategy | WisdomTree Europe Defence |
For investors specifically targeting the European spending cycle, WisdomTree Europe Defence UCITS ETF offers the most convincing overall combination of exposure, cost and fund scale.
For a more diversified portfolio with a lower fee, iShares Global Aerospace & Defence UCITS ETF is arguably the strongest global option.
Investors seeking exposure to cybersecurity and next-generation defence capabilities may prefer either VanEck Defense or the Future of Defence UCITS ETF.
Why European military spending could remain elevated
The European defence cycle is supported by more than a temporary reaction to one conflict.
Replenishing depleted inventories
European countries have transferred ammunition, vehicles and air-defence systems to Ukraine. Replacing these stocks can create additional orders before countries expand their forces beyond previous levels.
Meeting NATO commitments
The move from the former 2% benchmark towards 5% of GDP by 2035 implies a substantial increase in long-term expenditure—even if some countries ultimately fall short.
Reducing dependence on the United States
European governments want greater capacity to defend the continent with locally produced aircraft, missiles, drones, ships and electronic systems.
Expanding production capacity
Defence manufacturers need multi-year contracts before investing in factories, supply chains and skilled labour. Longer government commitments can improve revenue visibility.
Modernising older equipment
Some European armed forces continue to operate equipment designed or purchased during the Cold War. Replacement programmes can extend over many years.
New areas of military investment
The defence budget now extends beyond traditional weapons to:
- artificial intelligence;
- cybersecurity;
- electronic warfare;
- military satellites;
- autonomous systems;
- counter-drone technology;
- secure communications;
- quantum technology;
- military logistics and mobility.
These areas may benefit technology, semiconductor, software and space companies alongside traditional contractors.
The principal investment risks
Valuation risk
Defence shares have already attracted substantial investor inflows. An industry can enjoy strong revenue growth while its shares fall if current valuations imply even faster earnings growth.
Government-budget risk
Higher defence targets remain political commitments rather than guaranteed corporate revenue. Governments can postpone orders or change procurement priorities.
Contract risk
Large defence projects frequently experience delays, cost overruns and technical problems. Fixed-price contracts can place much of that risk on the manufacturer.
Concentration
Owning 25 or 50 defence companies does not create broad economic diversification. Their revenues may depend on the same governments and geopolitical assumptions.
Peace and geopolitical developments
A lasting reduction in geopolitical tensions could lower the urgency of rearmament and compress sector valuations.
Ethical considerations
Defence ETFs apply different exclusion policies. Some avoid controversial weapons but still hold companies involved in missiles, combat aircraft or nuclear programmes.
Investors should inspect the methodology rather than assuming that “screened,” “responsible” or “European” has a universal definition.
Currency exposure
Buying an ETF in euros does not necessarily remove currency risk. A globally invested fund can remain exposed to the dollar, pound, Swedish krona and other currencies.
Civil-aerospace exposure
Some aerospace-and-defence companies also manufacture commercial aircraft and components. Their results can therefore depend on airline demand and production cycles—not only military expenditure.
How much should investors allocate?
Defence ETFs are concentrated thematic funds and should generally be treated as satellite investments.
A broad global equity ETF already includes companies such as Airbus, RTX, Safran, Rolls-Royce, General Dynamics and other defence suppliers. Purchasing a specialist ETF creates an additional overweight rather than completely new exposure.
One possible structure could be:
- 90%–95% diversified core investments;
- 5%–10% specialist defence allocation.
More cautious investors may use less than 5%. The appropriate allocation depends on portfolio size, risk tolerance, investment horizon and existing holdings.
Investors should be financially able to tolerate a significant correction. Government spending may rise steadily while defence-company share prices remain volatile.
What Belgian investors should verify
Belgian investors should identify the exact ETF and share class before trading.
Important points include:
- ISIN;
- accumulating or distributing structure;
- fund domicile;
- Belgian registration status;
- applicable stock-exchange transaction tax;
- broker commission;
- bid-ask spread;
- trading currency;
- underlying currency exposure;
- potential taxation of distributions or realised gains;
- the fund’s controversial-weapons policy;
- whether the broker handles Belgian reporting and tax collection.
Two listings of the same ETF may trade in different currencies while representing the same underlying portfolio. Trading in euros avoids a transaction-level currency conversion in some cases, but it does not automatically hedge the foreign-currency exposure of the holdings.
Final verdict
Europe’s defence-investment cycle is supported by rising NATO targets, the EU’s Readiness 2030 framework, depleted military inventories and the need to rebuild industrial capacity.
Among the main UCITS choices:
- WisdomTree Europe Defence UCITS ETF is the best direct vehicle for the European rearmament theme;
- iShares Global Aerospace & Defence UCITS ETF offers the best balance of low cost and global diversification;
- VanEck Defense UCITS ETF provides broader exposure to defence technology and cybersecurity;
- Future of Defence UCITS ETF offers a distinctive NATO-and-allies strategy;
- Global X Europe Focused Defence Tech UCITS ETF is a more speculative European technology alternative.
The long-term spending trend appears strong, but the investment opportunity is no longer undiscovered. Many defence stocks have already re-rated significantly.
Investors should therefore compare valuation, index construction, geographical exposure and concentration—not simply purchase the fund with the most impressive recent return.
This article is provided for informational purposes only and does not constitute personalised investment, tax or legal advice. ETF holdings, expenses, performance and tax treatment can change. Investors should consult the latest prospectus and Key Information Document before investing.
Sources: NATO—Defence expenditure and the 5% commitment, European Commission—Readiness 2030, WisdomTree Europe Defence UCITS ETF, iShares Global Aerospace & Defence UCITS ETF, VanEck Defense UCITS ETF, Future of Defence UCITS ETF, Global X Europe Focused Defence Tech UCITS ETF
