Is This the Best Way to Invest in Outer Space?

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The latest investor-facing innovation: Procure Space ETF (NASDAQ:UFO), an exchange-traded fund dedicated to companies touching the space economy.” data-reactid=”12″>The latest investor-facing innovation: Procure Space ETF (NASDAQ:UFO), an exchange-traded fund dedicated to companies touching the space economy.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="An ETF for the new space age” data-reactid=”19″>An ETF for the new space age

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Procure Space was designed to create diversified exposure to the many companies, large and small, that have a presence in space or that support companies embedded in the orbital industry. Based on the S-Network Space Index, the ETF is currently composed of 30 stocks covering a number of key pieces of the space economy.” data-reactid=”20″>Procure Space was designed to create diversified exposure to the many companies, large and small, that have a presence in space or that support companies embedded in the orbital industry. Based on the S-Network Space Index, the ETF is currently composed of 30 stocks covering a number of key pieces of the space economy.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Launched in April, the ETF’s track record to date is still limited. Since its inception, it has traded in a fairly tight range. As of Dec. 13, it was down about 2%, which represents one of the lowest trading points since its debut.” data-reactid=”21″>Launched in April, the ETF’s track record to date is still limited. Since its inception, it has traded in a fairly tight range. As of Dec. 13, it was down about 2%, which represents one of the lowest trading points since its debut.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="According to Procure Space’s creators, its mandate is to focus principally on companies that are currently engaged directly in space-related enterprise:” data-reactid=”22″>According to Procure Space’s creators, its mandate is to focus principally on companies that are currently engaged directly in space-related enterprise:

“At least 80% of the index weight is allocated to companies that derive a majority of revenues from space-related industries, including those companies utilizing satellite technology.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This mandate is reflected in its top holdings, which include Maxar Technologies (NYSE:MAXR), Garmin (NASDAQ:GRMN), Trimble (NASDAQ:TRMB), Viasat (NASDAQ:VSAT), Eutelsat Communications (EUTLF), Iridium Communications (NASDAQ:IRDM) and Inmarsat (IMASF).” data-reactid=”26″>This mandate is reflected in its top holdings, which include Maxar Technologies (NYSE:MAXR), Garmin (NASDAQ:GRMN), Trimble (NASDAQ:TRMB), Viasat (NASDAQ:VSAT), Eutelsat Communications (EUTLF), Iridium Communications (NASDAQ:IRDM) and Inmarsat (IMASF).

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Investing in a booming sector” data-reactid=”27″>Investing in a booming sector

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="It seems as if everyone knows the space economy is gearing up for growth. However, according to UBS, financial markets barely comprehend the scale of growth on the horizon:” data-reactid=”28″>It seems as if everyone knows the space economy is gearing up for growth. However, according to UBS, financial markets barely comprehend the scale of growth on the horizon:

“Mainstream financial markets are only just starting to awaken to the commercial and disruptive opportunities that space offers, as technology is starting to tear down the high entry barriers to access space. We forecast that the combination of declining space launch costs and advances in satellite technology will raise the value of the space economy from $340 billion currently to nearly $1 trillion over the next two decades.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Procure Space, while focused principally on the opportunities available in the existing space economy, is also looking to the future with an eye toward evolving right alongside the space sector:” data-reactid=”32″>Procure Space, while focused principally on the opportunities available in the existing space economy, is also looking to the future with an eye toward evolving right alongside the space sector:

“The Index Provider believes that additional companies engaged in other space-related industries may emerge in the future, including: Space Tourism, Including Transportation and Hospitality, Space-based Military and Defense Systems, Space Resource Exploration and Extraction, Space Colonization and Infrastructure, Space Technologies that Enable the Space Economy.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Many of these technologies remain speculative, while others are rapidly approaching reality. Virgin Galactic Holdings Inc. (NYSE:SPCE), for example, has become the first publicly traded space tourism company. Clearly, the space economy is changing and growing rapidly. Exposure to the space as a whole thus has some obvious appeal to a reasonable investor.” data-reactid=”36″>Many of these technologies remain speculative, while others are rapidly approaching reality. Virgin Galactic Holdings Inc. (NYSE:SPCE), for example, has become the first publicly traded space tourism company. Clearly, the space economy is changing and growing rapidly. Exposure to the space as a whole thus has some obvious appeal to a reasonable investor.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Missing the private sphere is a problem” data-reactid=”37″>Missing the private sphere is a problem

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="While the ETF offers exposure to publicly traded companies serving the space economy, it does not do the same for private companies. That is a severe limitation, given the importance of a number of private names driving and accelerating the development of the space economy.” data-reactid=”38″>While the ETF offers exposure to publicly traded companies serving the space economy, it does not do the same for private companies. That is a severe limitation, given the importance of a number of private names driving and accelerating the development of the space economy.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Obvious examples of private companies at the forefront of the space economy are Elon Musk’s Space Exploration Technologies (widely known as SpaceX) and Amazon.com Inc. (NASDAQ:AMZN) founder Jeff Bezos’ Blue Origin. Both companies are engaged in rocket development, orbital transportation and satellite communication endeavors, all of which are likely to have an outsized impact on both the expansion of, and public enthusiasm for, pushing further into space.” data-reactid=”39″>Obvious examples of private companies at the forefront of the space economy are Elon Musk’s Space Exploration Technologies (widely known as SpaceX) and Amazon.com Inc. (NASDAQ:AMZN) founder Jeff Bezos’ Blue Origin. Both companies are engaged in rocket development, orbital transportation and satellite communication endeavors, all of which are likely to have an outsized impact on both the expansion of, and public enthusiasm for, pushing further into space.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Of course, the exclusion of private companies is simply a fundamental limitation of an exchange-traded fund, so the Procure Space ETF can hardly be blamed for their absence. SpaceX and Blue Origin do not trade publicly, and therefore cannot be included in any ETF. However, while not a fault per se, this fact does obviously limit its ability to truly reflect the space economy as it is actually developing.” data-reactid=”40″>Of course, the exclusion of private companies is simply a fundamental limitation of an exchange-traded fund, so the Procure Space ETF can hardly be blamed for their absence. SpaceX and Blue Origin do not trade publicly, and therefore cannot be included in any ETF. However, while not a fault per se, this fact does obviously limit its ability to truly reflect the space economy as it is actually developing.