The top funds and investment trusts for European defence spending

European defence budgets are being bolstered as the continent takes a more self-sufficient approach to its defence. Which are the best funds and investment trusts for investors to access increased European defence spending?

The uptick in spending has seen several European defence companies among the top stocks for DIY investors this year. European defence stocks have seen significant gains so far this year off the back of the spending commitments.

“Since the start of the year, investors have piled into European defence stocks on the basis that the continent’s skyrocketing defence equipment budgets will be principally funnelled towards local producers,” said Tom Bailey, head of research at HANetf.

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This is exemplified by the €80 billion rearmament plan that, according to Politico, eschews American providers in favour of European businesses, with just 8% of the proposed spend directed towards the US.

“This marks a stark break with [Germany’s] procurement past,” said Bailey. “Between 2020 and 2024, 80% of Germany’s military imports came from the US. The new budget suggests a serious effort on the part of Germany to both spend more and ensure that local, European companies are the key beneficiaries.”

There is clearly an opportunity here for savvy investors. But which exchange-traded funds (ETFs) and investment trusts can investors use to gain diversified exposure to European defence spending?

Investment trusts for European defence exposure

One way of accessing the European defence spending trend is to use an investment trust that offers exposure.

“Some defence companies have seen their share prices soar but that’s not the case across the board,” said Annabel Brodie-Smith, communications director at the Association of Investment Companies (AIC). “We have identified the investment trusts with exposure to defence which might be best placed to benefit.”

The AIC analysed the investment trusts that have the most defence exposure. Global Opportunities Trust (LON:GOT) was identified as the company with the greatest exposure to European defence stocks, with 9.8% of its holdings falling into the sector as of 30 June.

Here’s the top 10 investment trusts for defence exposure, according to the AIC:

<sup>Source: theaic.co.uk / Morningstar / trust reports and factsheets. Latest available data at 27/03/25.
* indicates exposure to: AeroVironment Inc, Airbus SE, Babcock International Group, BAE Systems, Boeing Co, Chemring Group, Dassault Aviation SA, GE Aerospace, General Dynamics +C7Corp, Howmet Aerospace, L3Harris Technologies, Leonardo DRS, Lockheed Martin, Northrop GruMman, Palantir Technologies, QinetiQ Group, Rheinmetall AG, Rolls-Royce Holdings, RTX Corp, Safran, Textron, Thales and TransDigm Group.</sup>

Top ETFs for European defence

There are various ETFs available for investors that want to gain exposure to defence stocks.

One of these is the Van Eck Defense UCITS ETF (LON:DFNS), which tracks the MarketVector Global Defence Industry index. According to Trustnet, this was the first defence-focused ETF that European investors could buy when it launched in March 2023.

The first ETF to focus specifically on European Defence companies was the WisdomTree Europe Defence UCITS ETF (LON:WDEF), which listed on the LSE on 12 March. The ETF focuses exclusively on European-based companies in the defence industry.

“A structural shift is underway in Europe as nations increase defence budgets to meet NATO targets and respond to geopolitical challenges,” says Pierre Debru, head of research, Europe at WisdomTree. Debru adds that WDEF “is built around a timely and urgent theme focused on Europe’s push for strategic autonomy in defence amid rising geopolitical tensions.”

WDEF has recently been joined by the Future of European Defence UCITS ETF (LON:NAVY) from HANetf. NAVY follows on from the success of HANetf’s Future of Defence UCITS ETF (LON:NATP), which had over $2.8 billion in AUM as of 27 August. While NATP holds companies aligned to any NATO member state (including the US), NAVY focuses specifically on European defence firms.

“We believe that, as a proudly European ETF firm, it is our duty to support investment into the European defence sector as efficient capital markets will allow European champions to expand their capabilities much more efficiently,” says Hector McNeil, co-founder and co-CEO of HANetf.