European Defence ETFs Expand as Strategic Autonomy Gains Investment Momentum

One of the core areas of analysis for Defence Finance Monitor has long been the intersection between Europe’s defence transformation and capital markets. The recent acceleration in the creation of defence-focused exchange-traded funds (ETFs) in Europe marks a significant development in this space—both financially and strategically. As EU and NATO member states commit to multi-decade rearmament programmes, institutional investors are increasingly channelling capital into defence-linked instruments that offer diversified exposure to the companies underpinning Europe’s evolving security architecture.

Over the past few months, several new ETFs focused exclusively on the European defence industry have been launched by leading asset managers. These funds are structured to invest in firms active in aerospace, defence manufacturing, advanced electronics, and dual-use technologies across NATO-aligned and EU member states. They represent a response to the growing visibility and scale of national and European defence budgets, particularly in the context of EU initiatives such as the European Defence Fund (EDF), PESCO, and the SAFE instrument. Investors are beginning to view the defence sector not only as politically legitimised but as economically resilient and structurally tied to Europe’s long-term strategic autonomy agenda.

The volume of capital flowing into global defence ETFs has more than doubled compared to the previous year, with European-focused products capturing a growing share of that expansion. This signals a shift in how financial markets assess the long-term performance and relevance of the European Defence Technological and Industrial Base (EDTIB). Once marginalised within ESG frameworks, the defence sector is now being reconsidered as a key enabler of democratic stability and geopolitical balance. Several institutional investors that had previously excluded defence from their portfolios are now re-evaluating those positions in light of this new strategic context.

This shift reflects more than just investor sentiment—it mirrors a deeper reorientation within Europe’s industrial and regulatory frameworks. As procurement policies increasingly prioritise intra-European production and capability development, firms that align with EU strategic priorities are better positioned to secure contracts, scale production, and attract long-term investment. ETFs offer a mechanism to aggregate capital in a compliant and efficient structure, enabling broader participation in this new phase of defence-driven industrial growth.

For DFM, this development underscores a key thesis: financial instruments such as ETFs are no longer peripheral to the defence sector—they are becoming integral to its funding, structure, and resilience. The defence investment landscape in Europe is transforming rapidly, and those actors—financial or industrial—who can understand and navigate the regulatory, doctrinal, and technological frameworks shaping this shift will be best placed to participate in its long-term success. Defence Finance Monitor continues to track this convergence with precision, offering strategic insight into the policies, capital flows, and enterprise positioning that define Europe’s security-finance nexus.