Global investors launch Europe defence funds to profit from rearmament

By Iain Withers

LONDON (Reuters) -BlackRock and BNP Paribas have become the latest asset managers to launch exchange-traded funds focused on funnelling cash into Europe's defence industry, with at least nine new funds created in the last seven months.

European governments are ramping up spending on ammunition, tanks and other arms in response to deepening geopolitical tensions and U.S. President Donald Trump's warnings that they should not rely so much on Washington.

This has prompted money managers to tap into growing investor demand to profit from the region's rearmament drive. Asset managers offer more than 50 defence industry ETFs globally, but Europe-focused products are a recent trend, with nine launched since late last year, according to company releases and data from Morningstar Direct.

The world's largest asset manager BlackRock and the fund arm of French bank BNP Paribas said their launches were in response to increased demand. Amundi and WisdomTree had earlier launched similar products.

ETFs are a fast-expanding part of the investment market, offering investors exposure to an index of stocks or bonds without having to pick individual assets.

Investors globally have ploughed an additional $8.4 billion into defence ETFs so far this year, of which $2.7 billion has been put into the new European-focused products, according to Morningstar data.

The overall $8.4 billion is more than double the $4.1 billion added over the whole of 2024, the data shows.

The BlackRock European product, launched under its iShares platform, listed in Amsterdam and Frankfurt on Wednesday, according to a statement from the product index provider STOXX.

BNP Paribas' asset management arm said in a statement on Tuesday that it had listed in Paris an ETF focused on European defence and would soon list it in Germany, Italy and Switzerland.

The fund will focus on financing defence companies within European NATO member states, BNP said.

Defence stocks have soared in value this year, helping to attract money managers offering new investment products. Fund managers including Allianz and UBS have also ditched some prior exclusions on investing in defence.

(Reporting by Iain WithersEditing by Mark Potter)