ETFs
Space ETFs: the final frontier of investment?
Andrew Chanin, Co-Founder and CEO of ProcureAM, Joins Wealth! For Yahoo Finance Space Week to offer advice for investing in the space industry.
Chanin explains that because it can be difficult for investors to capture all the companies with exposure to the space industry, a space equity traded fund (ETF) that consolidates these companies can be a useful tool. However, the ProcureAM founder says managing an ETF is “extremely important” and that investors should watch for a “workable” plan from fund managers.
Chanin adds that the companies included in Procure’s recent space ETF (UFO) are those who “[enable] space technologies to create something that could help consumers. But there are also other companies involved in areas like rocket launching, such as Rocket Lab (RKLB) …where these types of companies are helping to not only bring things into space, but hopefully also reduce the cost and access of using space.
For more expert insights and the latest market action, click here to watch this full episode of Wealth!
Find Yahoo Finance’s special coverage on this week’s show Space Race: Investing in the Last Frontier series.
This message was written by Nicolas Jacobino
Video transcription
Well, investors have more choices than ever among space ETFs, but which ones might be worth exploring.
Procure A MS, Procure ASA UFO and space exploration-focused ETFs launched in 2019 stand out. For more on how to play in the space sector, we have Andrew Chan and who is the co-founder and CEO of Procure. AM as part of the Yahoo financial space.
We are delighted to have you with us today.
Andrew first of all, just take us to the UFO.
The components that you use to really make sure that this is a complete approach to a space thematic ETF.
So when we decided to launch UFO as the first purely global space ETF, one of the really important factors for us was to choose an index that we believed represented the space industry and whose rules and the methodology was aligned with the results. these pure play companies.
So the index was actually co-developed by a former research director at the Space Foundation, uh Michael Walter Range, where he had helped them build and develop the calculations that the Space Foundation uses to determine annual growth of size and types. of businesses and technologies that encompass the global space economy.
So, uh, you know, having a team of people who are very knowledgeable about both indexing and ETFs as well as the space industry itself was a way that we felt really differentiated this approach to truly find companies that derive from it.
The story continues
Um, for this fund, over 80% of the fund is focused on companies that generate the majority of revenue in the space.
So, as the previous segment mentioned, you know, companies that are active in launches, satellites, communications, as well as many other types of areas like defense, which today are becoming extremely important for the entire space industry.
I mean, some of these companies are space companies, some of them are space dependent.
I guess what is the best valuation that investors should actually deploy when trying to determine how much exposure a company has to make its investment decision.
So this index team does a significant amount of research to determine where the revenue for these different companies comes from.
So, you know, some of the names that you just mentioned, some of these companies are the ones that are space dependent, meaning if you took space out of the equation, like a GPS focused company like Garmin, their products just don’t work.
So these are companies that are enabling space technologies to create something that maybe helps consumers.
But there are also other companies that are involved in areas like rocket launching, like the rocket lab mentioned in the previous segment where you know, these types of companies help, not only bring things into the ‘space, but hopefully reduce the cost and access to the use of space as well.
So there are many different types of space companies.
I think over the last few years we’ve seen a lot of specialty companies come out and some of them weren’t necessarily ready, you know, for public markets and didn’t necessarily bring out their companies at the best moment. or with the best kind of financing, uh, you know, to really drive it to the next stage of growth for these companies.
But as some of these companies set up and really focus on running and running businesses and trying to get deals done, they’re sort of in this new stage of their own development.
So it’s very important to understand, you know, the different types of companies that are out there, but it’s difficult, which is why an ETF can be interesting given that something like UFO gives access to over 30 companies listed in stock market around the world. .
But management is extremely important and you have to understand that they have a plan that is achievable and in some cases, you know, some companies are completely dependent on government contracts, for example from space agencies such as NASA or the ESA in Europe.
Um, some companies are more diversified and have commercial clients as well as government contracts only focused on consumer commercial contracts.
So those who are diverse might be able to weather different storms differently.
And Andrew, finally, we only have about 30 seconds here.
How can you sort of guard against volatility, volatility in the form of not getting one of these major contracts from a government or volatility in the case where a launch goes poorly or has to be rescheduled.
Yes.
So all of these factors can be very important to the viability of space companies, which is why we think investors might be interested in using something like an ETF that provides that diversification at the company level.
Um, while different companies may have insurance policies or other things that might protect against the specific risks of individual launches.
Um, every company is at its own current stage of its own growth cycle.
Um And it’s, it’s, it’s difficult.
So certainly other types of hedging opportunities, like using options or things like that, could be a way to protect against that, you know, investing in the space industry at large.
UFO offers, you know, a way that might be interesting for some investors to have access to many companies doing various things in the sector.
Andrew Chan and who is the co-founder and CEO of Procure and thank you so much for taking the time here with us.
Enjoy it.
THANKS.