Want to invest in space? Here’s a new ETF to check out on the London Stock Exchange

The London Stock Exchange isn’t the first place you’d look to invest in space companies. Almost exclusively, these are to be found across the pond, which is home to SpaceX, Rocket Lab, AST SpaceMobile, and others.

However, a new space-themed exchange-traded fund (ETF) has been launched in the UK. Unlike traditional space ETFs, which are often dominated by sprawling aerospace and defence companies, this one will capture new SpaceTech listings as they enter public markets, wherever that may be.

As such, this could give investors an exciting way to tap into the global space industry’s growth as it heads towards becoming a multi-trillion-dollar market over the next two decades.

Let’s take a closer look at this new London-listed ETF.

SpaceTech megatrends

The name is Seraphim New Space ETF (LSE:SERA). Operated by HANetf, its purpose is to give “investors focused exposure to a portfolio spanning SpaceTech and infrastructure megatrends“. 

It’s based on the Seraphim New Space Index which has been developed from Seraphim Space’s decade of experience investing in this area. The index uses a conviction-weighted methodology, meaning the research team allocates larger weights to firms it has real conviction in, rather than simply the largest by market-cap.

Now, this does introduce an element of risk, to my mind. Because during market downturns, these high-potential companies might sell off aggressively. Therefore, I would expect this ETF to be very volatile moving forward.

The portfolio

So what stocks are in it? Well, pioneer SpaceX is in there. That’s hardly a shock as it’s moving this industry forward at a rapid pace, evidenced recently when Starship successfully reached orbit on its 14th test flight.

When fully operational Starship could dramatically increase the mass and volume that can be put into orbit, lowering costs and enabling new categories of space-based infrastructure. 

Seraphim Space Investment Trust

But while large with a 9.6% portfolio weighting, SpaceX isn’t the biggest holding. That’s Seraphim Space Investment Trust from the FTSE 250. This trust’s made up of predominantly private SpaceTech firms.

Therefore, investors in this ETF get indirect exposure to private space companies as well as public ones. Here are some recent developments from holdings in the FTSE 250 trust’s portfolio:

• Hubble Network raised $200m at a $1.6bn valuation to expand its satellite network.
• Top holding ICEYE partnered with Nokia on sovereign satellite communications.
• HawkEye 360 won around $18m in Middle East defence contracts.

The ETF also holds Amazon, which is building out its Leo satellite internet constellation. Obviously, Amazon is a massive tech giant which, unlike a speculative stock, is very unlikely to lose most of its value during a market crash.

Lots of promise

The convergence of artificial intelligence and SpaceTech is accelerating demand for connectivity, data and computing power, while falling launch costs are unlocking new commercial applications. Together, these forces are driving the emergence of a multi-trillion-dollar opportunity.

Seraphim New Space ETF

For all its potential, this ETF is towards the higher end of the risk spectrum. The holdings are mainly in one sector, making it susceptible to a sell-off if sentiment turns against space stocks.

However, for investors wanting broad-based exposure to the global space industry, I think it’s worth considering as a smaller position in a diversified portfolio. It has a lot of long-term promise.

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Ben McPoland owns shares in SpaceX.