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Space ETFs Soar on ARK Investment Management's Filing

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Procure Space ETF (UFO - Free Report) jumped 5.7% on Jan 14 as Cathie Wood’s ARK Investment Management filed for a space ETF. After a super successful 2020, who doesn’t know Wood’s ground-breaking ARK Investment Management and its breakthrough products? The issuer has now acquired a place in the top-10 list in the $5.5-trillion ETF industry, per a BloombergQuint article (read: 5 Top-Performing ARK ETFs Worth Your Attention Now).

The fund house has products in disruptive areas like Next-Gen Internet, genomic revolution, autonomous tech and robotics, fintech innovation, mobility-as-a-service and 3D printing and each of them has been posting superb results. Its Next Generation Internet ETF (ARKW - Free Report) and Innovation ETF (ARKK - Free Report) each gained about 160% last year, and its Fintech Innovation ETF (ARKF - Free Report) and Autonomous Technology & Robotics ETF (ARKQ - Free Report) each saw prices doubling. ARK Genomic Revolution ETF (ARKG - Free Report) surged 208.4% over the past year.

No wonder, if a fund house of such fame announces that it is starting a space-focused ETF, space stocks and ETFs will simply fly off. The space-travel company Virgin Galactic Holdings Inc. (SPCE - Free Report) was up about 19.9% on Jan 14. Space technology solutions provider Maxar Technologies Ltd. (MAXR - Free Report) surged 19.6% on the day. Satellite communications company Iridium Communications Inc (IRDM - Free Report) also jumped about 8.7% on Jan 14.Global satellite data communications company ORBCOMM Inc. (ORBC - Free Report) soared 10.1%. Loral Space and Communications Inc. was up 13.9%.

Inside the Newly Filed ETF

The actively managed ARK Space Exploration ETF’s investment objective is long-term growth of capital. The expense ratio is yet not disclosed. The issuer sees “Space Exploration” as benefiting from technologically enabled products and services that happen beyond the surface of the Earth.

The adviser grouped Space Exploration Companies into four principal categories. According to the SEC filing, the first is Orbital Aerospace Companies that launch, make, service, or operate platforms in the orbital space, including satellites and launch vehicles. The second is Suborbital Aerospace Companies that are into the suborbital space, including drones, air taxis and electric aviation vehicles.

The third category is Enabling Technologies Companies that create the technologies required for successful value-add aerospace operations, including artificial intelligence, robotics, 3D printing, materials and energy storage. Finally, Aerospace Beneficiary Companies are those that stand to benefit from aerospace activities, including agriculture, internet access, global positioning system (GPS), construction and imaging.

How Big Will the Space Economy Be Ahead?

The space is likely to witness exponential growth ahead. Not only listed companies,privately held space exploration firms have also been developing space technologies. Morgan Stanley estimates that the global space industry could amass revenues of more than $1 trillion in 2040, up from about $350 billion, currently.

Bank of America expects the growing space economy to more than triple in size in the coming 10 years. The area is less likely to be impacted by the COVID-19 issue as “most spending in space is business-to-business/government (B2B/G), which generally recovers faster than business-to-consumer (B2C) spending,” Bank of America analyst Ron Epstein wrote in a research note to investors, as quoted on CNBC. BofA applied a CAGR of 10.6% to the industry size and estimated a $1.4 trillion space economy in 2030.

Space ETF Bets Available in the Market Now

Like UFO, SPDR S&P Kensho Final Frontiers ETF (ROKT - Free Report) also benefited on Jan 14 due to its exposure to the space-focused stocks. The fund ROKT was up 2.6% on the day. Another fund Defiance Next Gen SPAC Derived ETF SPAK gained 1.5% on the day due to its exposure to Virgin Galactic.

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