Defence ETFs and the Mainstreaming of the Sector
The defence and security sector has seen a dramatic rise in prominence among investors in recent years. Heightened geopolitical tensions – notably Russia’s war in Ukraine, instability in the Middle East, and doubts over U.S. strategic commitments – have driven governments worldwide to sharply increase military spending. World military expenditure reached a record \$2.72 trillion in 2024 (up 9.4% from 2023)[1], with Europe alone boosting its budgets by 17% and the United States reaching nearly \$1 trillion (66% of NATO’s total)[2][3]. In this context, defence companies and their stock prices have rallied. Institutional and retail investors – from sovereign wealth funds to individual savers – have sought exposure to this trend via equity markets. Exchange-traded funds (ETFs) focused on defence and related technologies have proliferated, transforming what was once a niche or even “taboo” segment into a visible investment theme. This study examines the rise of defence/security ETFs: mapping the global universe of active funds, their design and indices, investor flows and sentiment, regulatory factors (including ESG), and the implications for financial markets, industry, and security policy. We draw on authoritative sources (Reuters, Financial Times, ETF providers, NATO/EU reports, think tanks, etc.) from 2024–2025 to provide detailed, up-to-date analysis.