Ground Control to Major Tom: What Can Space Funds Do for Portfolios?

Space: the final frontier, and increasingly, a serious investment consideration.

The Artemis II crew returned from its orbit around the moon last week, and SpaceX is reportedly preparing for an initial public offering this summer that could value the company at more than $2 trillion. The headlines and enthusiasm for investing in the cosmos are hard to ignore. But for financial advisors, the opportunity is less about chasing big names and more about how to target exposure to a fast-growing space economy, without overreliance on megacap stocks.

“Advisors should look outside of the megacap companies because there are so many small and even microcap groups that are part of the technological supply chain,” said Travis Prentice, chief investment officer at asset manager Informed Momentum.

No One Can Hear You Theme

With SpaceX expected to have such a massive IPO, it may not be long before it shows up in broad index funds like SPY or VOO. That may not be the most opportunistic investing strategy for such a fast-growing sector, though, Prentice told Advisor Upside. “A broader index fund might have exposure to the space sector, but it’s not explicit, and you’re always going to be diluted by other things,” Prentice said.

Space-themed ETFs performances have not just lifted off, but exited the atmosphere:

• The ARK Space & Defense Innovation ETF (ARKX) has returned 80% in the past year
• The SPDR S&P Kensho Final Frontiers ETF (ROKT) has climbed 118%.
• The Procure Space ETF (UFO) has skyrocketed a whopping 145%.

Meanwhile, individual stocks like Rocket Lab, Planet Labs and Spire Global, spanning a wide range of market caps, are up hundreds of percentage points over the same period. 

Blast Off. Many investors tend to think of the space economy as exploration, asteroid mining and future technologies, when in reality capital is flowing toward AI, cloud computing and blockchain technology, said Andrew Chanin, co-founder and CEO of ProcureAM. “A lot of data movement relies on satellite networks and space-based infrastructure, so in many ways, space is already a core part of the digital economy,” he told Advisor Upside. “It’s just not always visible.”

Armando Pantoja, entrepreneur and tech investor, pointed to companies like Red Wire and the privately held Northwood Space as examples of “picks and shovels” in the space economy. “Launch systems, satellites, parts manufacturers — those are the ones that are going to do a lot better, percentage wise, than something like SpaceX,” he said. “SpaceX is probably a little too high right now, but once it comes out, it’s going to create that halo effect, and the entire sector will start to do well.”