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Space: unique investment opportunity or science fiction?

15 August 2022

 

When Elon Musk was a teenager, the space and electric vehicle entrepreneur was fascinated by the seven-book Foundation science fiction series. Written in the second half of the 20th century by scientist and author Isaac Asimov, it charts the decline and rebirth of an inter-stellar empire, helping to inspire Musk’s quest to conquer space, as he told Rolling Stone magazine in 2017.1

Like many young people at that time, I also read the Foundation series, which you can now see on Apple TV. Indeed, it’s one of the reasons why I’m excited about the VanEck Space Innovators UCITS ETF’s recent launch that tracks the disruptive progress of private enterprise in space.

Traditionally, space was the realm of governments. In the 20th century, the United States and Soviet Union competed in a space race to achieve superior space flight capability – chiefly for military and political reasons.

Yet today the private sector dominates the 21st century’s space race, rapidly developing the new technologies shrinking the cost of reaching the stars. Musk’s quest through his SpaceX company to reduce the cost of visiting Mars, leading to the formation of large Martian settlements, captures the popular imagination. In truth, though, the commercial action is taking place not far above our heads.

Entrepreneurial space companies are building reusable rockets and miniature low-orbit satellites that mean the cost of accessing space is falling fast. At the same time, there’s spiralling demand for satellites for communications, as well as newer areas like space tourism. Constellations of satellites are bringing low-cost internet services to remote villages, keeping tabs on climate change and powering GPS navigation systems. It’s estimated that space could be a $1 trillion industry by 2040, up from $350 billion today, according to Morgan Stanley Research.

The Global Space Economy ($t)

The Global Space Economy ($t)

Source: Haver Analytics forecasts

As with many of today’s disruptive growth industries, though, much of the investment is being made privately, out of the reach of public investors. Total venture capital investment increased by 95% to $8.7bn in the 12 months to the end of March 2021, according to the Seraphim SpaceTech Index, a quarterly tracker of funding deals in the sector.

However, there are some space companies in the public markets through which you can invest. Always at the forefront of innovation, we launched the VanEck Space Innovators UCITS ETF that to offer the growth opportunities to a wider realm of investors. Note that the growth of the market is not guaranteed.

Our ETF tracks 25 of the largest and most liquid space industry companies. The ETF’s diversification reduces the risk of capital loss, but does not fully eliminate it. The companies include some of the world’s largest satellite communication companies such as Eutelsat, rocket engine manufacturers like Italy’s Avio spa and even Virgin Galactic, Richard Branson’s space tourism pioneer.

Nothing could illustrate better the shifting power in space than how SpaceX2, a private company, has made its Starlink satellite communication system available to Ukraine’s armed forces. As space takes a more important role in the global economy and even world affairs, the commercial space sector as a whole looks poised for growth. For normal investors that means there’s an opportunity to make returns from rocket science and today’s accelerating space race.

Important Disclosure

This is a marketing communication. Please refer to the prospectus of the UCITS and to the KID before making any final investment decisions.

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