NASA ETF’s two-month $2.6 billion liftoff

Retail investors are rushing into the space investment trade ahead of the SpaceX IPO, and an ETF has cashed in on the enthusiasm.

TEMA ETFs’ Space Innovators ETF, which launched March 30 and trades under the ticker symbol NASAIt surpassed $1 billion in assets in just 37 trading days, and as of the end of this past trading week, had more than $2.6 billion in assets.

This rapid growth is partly due to retail investors looking to invest in SpaceX before it went public.

While SpaceX has taken an unusual approach to its offering, setting up access for retail investors through brokerage firms at a level that is unusual in new deals typically dominated by institutions, the NASA fund is another option for investors to gain access to Elon Musk’s rocket company. It already owns privately traded SpaceX shares 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 offer an investment in SpaceX,” Maurits Potts, founder and CEO of TEMA ETFs, said on CNBC’s “ETF Edge” on Wednesday.

Pott said there are no plans to sell shares after the IPO. “For us the IPO is just a commentary on the state of the market valuation,” he said.

NASA isn’t the only ETF that has access to SpaceX, though the options are limited. Mutual fund manager and billionaire Ron Baron, a longtime Tesla and SpaceX investor, owns the rocket company through his First Principles Fund.ronb). Tesla leads the RONB ETF with more than 14%, while SpaceX accounts for about 2% of the fund’s assets. iShares Private-Public Crossover ETF (XOVR), which provides access to late-stage private companies, also owns shares of SpaceX, which it says is worth about $300 million, based on an expected IPO price of more than $1.5 trillion.

Determining the exact valuation for the SpaceX deal remains a subject of controversy in the market and among investors before the deal is priced.

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

Todd Sohn, chief ETF strategist at Strategus, said several new space ETFs have launched in the past few months, including the Van Eck Space ETF (Taunt), Global X Space Tech ETF (orbx), and Roundhill Investments’ Space & Technology ETF (mars), which in itself is a sign that retail investors are expected to pursue this theme as they have with other recent thematic trades involving technological innovation ranging from AI to quantum computing. “To me it’s generally a very good thing that the industry expects space to be the next big thing,” Sohn told CNBC. “It’s exactly the same idea as AI was a few years ago and continues to be.”

In total, six space-themed ETFs were launched in the last three months. But Sohn cautioned that not all funds are created equal. “It all depends on how pure or diluted the ETF is. So due diligence is really important now,” he said.

There are other ETFs branded under the space investment theme that have already been in the market for years, building portfolios of shares that include pure-play, high-risk space exploration companies, satellite companies and broader aerospace and defense sector names.

Procure Space ETF (ufo), which launched in 2019 and has over $1.2 billion in assets rocket lab, Firefly AerospaceAnd Planet Labs One of its top holdings. SPDR S&P Kensho Final Frontiers ETF (ROKT), which launched in 2018, also remains intuitive machines And redwire.

ARK Space & Defense Innovation ETF (arkx) This is a good example of how a certain set of top stocks can spread far across the market, with its portfolio also including Amazon and Deere.

Sohn says investors interested in these ETFs and the space investing theme should consider how much overlap there is in the portfolio with more classic defense industry names, as well as how concentrated the fund is in a small group of high-risk stocks.

“There are a lot of companies doing this that are public,” Sohn said. “Some of them might have 30 holdings, some of them might have 50 or so,” he said of the current crop of space ETFs. “I think once SpaceX goes public and has been trading for a while, you’ll see some of these funds move into more concentrated bets, depending on how they’re managed,” he said.

This is another factor for investors to consider: For example, NASA is an actively managed fund, not tracking an existing index of stocks designed to represent a theme, which is the approach of UFOs, ORBX, ROKT and others.

Investors will pay more for an actively managed approach than a stock picker in the space: NASA has an annual net expense ratio of 0.87%, while ORBX charges 0.50%, and ROKT has an expense ratio of 0.45%.

It is clear that Elon Musk is going to be a big winner from the SpaceX IPO and possibly the world’s first trillionaire. But both Akins and Sohn said the biggest risk on the space theme for retail investors is volatility.

The risks in the space market were made clear this week by the launchpad explosion of Blue Origin’s New Glenn rocket.

“Expect volatility. That’s usually what happens with very early-stage industries. There will be companies that outperform and there will be companies within the ETF that get spun off because the business model doesn’t make sense,” Sohn said.

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