Fund Focus: Move over SpaceX, Seraphim Space has launched this new ETF to deliver investors access to growing space economy

The group behind the Seraphim Space Investment Trust (SSIT) has launched an exchange-traded fund (ETF) to offer retail investors access to the fast-growing and increasingly important space economy.

The New Space ETF (LON:SPCE) offers investors exposure to publicly listed companies at the “forefront of the new space economy”. It comes after investors piled into the sector off the back of the SpaceX IPO, which has driven significant interest in all things space. I had a look at the Seraphim earlier this year after a strong run for the fund that has since faltered.

The new ETF has a significant 8% holding in SpaceX, while over 12% of the fund is made up of the original Seraphim Space Investment Trust, offering investors indirect exposure to its portfolio of private companies.

Major holdings in the new ETF in defence and space systems firm Voyager Technologies, satellite designer and manufacturer AST SpaceMobile and geospatial analysis company HawkEye 360. Other holdings include space infrastructure group Redwire Corp and Firefly Aerospace, which makes lift launch vehicles for rocket launches.

The New Space ETF, which has been developed with specialist provider HANEtf, tracks the Seraphim New Space Index, a proprietary index developed by Seraphim. They note that unlike many existing space-themed funds, which are heavily weighted towards traditional aerospace and defence companies, the ETF focuses on businesses whose growth is directly linked to the commercialisation of space and the expansion of the New Space economy.

The index applies a ‘conviction-based’ approach, which means there is a discretionary element that allows Seraphim more control over the management of the ETF. Companies are assigned to tiers based on their overall assessment and weighted accordingly, providing greater exposure to businesses that Seraphim believes are best positioned to benefit from long-term structural growth.

The ETF is available at Saxo under the ticker SPCE, listed on the London Stock Exchange (not to be confused with Virgin Galactic, which is listed on the New York Stock Exchange with the same ticker).

Top 10 Holdings (as of 08/0926)

It’s not the cheapest space-based ETF on offer with an ongoing fee of 0.75%. Alternatives tend to be a little cheaper, such as the VanEck Space Innovators ETF (JEDI), which has an ongoing fee of 0.55%, or the WisdomTree Space Economy ETF (WSPG) with a fee of 0.5%.

What’s the difference between the SPCE ETF and the SSIT investment trust?

• An ETF is an open-ended fund that typically aims to track an index (such as the FTSE 100 or S&P 500 – or in this case the New Space Index). New units can generally be created or redeemed to meet investor demand, which helps keep the ETF price close to the value of its underlying holdings.

• An investment trust is a closed-ended company listed on the stock exchange. It has a fixed number of shares, so its share price is driven by supply and demand and can trade at a premium or discount to the value of its underlying assets (NAV).

Why ETFs may be easier for retail investors to access

• Simplicity: Most ETFs have a straightforward objective, such as tracking a market index. In the case of SSIT for example it is classed as a ‘Complex Product’ requiring investors to take an appropriateness test before they can invest. This is not the case with the SPCE ETF.

• Transparency: Holdings are usually published regularly and are easy to view.

• Lower costs: Many broad-market ETFs have very low ongoing charges, albeit 0.75% for SPCE is at the higher end.

• No discount/premium risk: ETF prices generally stay close to the value of the underlying assets, whereas investment trusts can trade significantly above or below NAV.

Where investment trusts may have an edge

• They can use gearing (borrowing) to potentially enhance returns.

• They can invest in less liquid assets such as private companies, infrastructure, or property. In the case of this ETF, the +12% holding in SSIT means there is indirect exposure.

• Skilled active managers may outperform an index, although this is not guaranteed. Often UK investors are used to investment trusts, feel familiar with the names and can feel more comfortable with the security being listed as shares, such as Scottish Mortgage Investment Trust.