Two months of NASA ETF, 2.6 billion liftoff

Retail investors rushed into space investing ahead of the SpaceX IPO, and one ETF has cashed in on the excitement.

Tema ETFs’ Space Innovators ETF, which launched on March 30 and trades under the ticker symbol NASAit surpassed $1 billion in assets in just 37 trading days, and by the end of this past trading week, it had reached over $2.6 billion.

That rapid rise is due in part to investors hunting for exposure to SpaceX before it goes public.

While SpaceX has taken an unconventional approach to its offering, establishing access to retail investors through trading firms that are unusual in new deals typically held by institutions, NASA’s fund is another way for investors to gain access to Elon Musk’s rocket company. It already owns shares of SpaceX that are privately traded directly. It is one of the few investment vehicles available to retail investors, with SpaceX currently representing about 7.5% of the fund.

“If we’re going to invest in space … We have to give exposure to SpaceX,” Maurits Pot, founder of Tema ETFs and CEO, said on CNBC’s “ETF Edge” on Wednesday.

Pot said there is no plan to sell shares once the IPO has taken place. “Our IPO is just a comment on the market price situation,” he said.

NASA isn’t the only ETF with access to SpaceX, though options are limited. Mutual fund manager and billionaire Ron Baron, a long-time Tesla and SpaceX investor, owns the rocket company through his First Principles fund (RONB). Tesla is the top holding in the RONB ETF, at more than 14%, while it holds about 2% of the fund’s holdings in SpaceX. Company valuation ERShares Private-Public Crossover ETFXOVR), which provides access to late-stage private companies, and owns SpaceX shares, which it says are worth about $300 million based on an expected IPO value of more than $1.5 trillion.

Setting the exact price of the SpaceX deal remains controversial in the market and among investors ahead of the deal’s pricing.

Mike Akins, founder of ETF Action, said on “ETF Edge” that the structure of the ETF itself is what makes this type of access possible for the everyday investor. “Ten, twenty years ago, you talked about a space theme like this, an investor would have to go out and look at all these companies. Now there’s a ticker,” said Akins.

Todd Sohn, chief ETF strategist at Strategas, noted that several new space ETFs have launched in the past few months, including the Van Eck Space ETF (The WARPThe Global X Space Tech ETF (ORBX), and Roundhill Investments’ Space & Technology ETF (MARS), which is a sign that retail investors are expected to pursue the theme as they have with other recent trades that play on tech innovations, from AI to quantum computing. “That to me is often a good read that the industry expects space to be the next big thing,” Sohn told CNBC. “It’s a very similar concept to what AI was a few years ago and moving forward.”

Six space-themed ETFs in all have been issued in the past three months. But Sohn cautioned that not all funds are created equal. “It all depends on how clean or diluted the ETF is. So due diligence on this is very important now,” he said.

There are other ETFs branded under the space investment theme that have been on the market for years, creating stock portfolios that include pure plays, high-risk space exploration companies, satellite companies, and broad names in the aerospace and defense sectors.

The Procure Space ETF (A UFO), which was launched in 2019 and has more than 1.2 billion assets, holds Rocket Lab, Firefly Aerospaceagain Planet Labs among its top items. Company rating SPDR S&P Kensho Final Frontiers ETFROKT), launched in 2018, also caught on Accurate machines again Redwire.

Rating of the company ARK Space and Defense Innovation ETFARKX) is a good example of how far a well-defined set of top stocks can go in the market, with its portfolio including Amazon and Deere.

Sohn says investors interested in these ETFs and the space’s investment theme should consider how much overlap there is in a portfolio with classic defense industry names, and how much the fund is focused on a small group of high-risk stocks.

“There are too many companies doing this that are public,” said Sohn. “Some of them might have 30 holdings, some of them might be closer to 50 or more,” he said of the current crop of ETFs in the space. “I have a feeling that with SpaceX going public and trading for some time, you’re going to see some of these funds turn into very focused bets, depending on how they’re managed,” he said.

That’s another aspect that investors should think about: NASA, for example, is an actively managed fund, rather than tracking an existing stock index designed to represent the total, which is the way UFO, ORBX, ROKT and others.

Investors will pay more for a diligently managed approach from a stock picker in the space: NASA has an average annual expense ratio of 0.87%, while ORBX charges 0.50%, and ROKT’s average expense ratio is 0.45%.

It is clear that Elon Musk will be the biggest winner of the SpaceX IPO and perhaps the world’s first trillionaire. But both Akins and Sohn say the biggest risk for retail investors getting into the space is volatility.

The risks in the space market were made clear this week by the explosion of the launch pad of the new Blue Origin rocket.

“Expect volatility. That’s usually what happens with very early stage industries. There are going to be very good companies and companies within the ETF that break up because the business model doesn’t make sense,” Sohn said.

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