ETF Talk

Well-Rounded Aerospace and Defense Fund Delivers Targeted Exposure

This week’s featured exchange-traded fund (ETF), the SPDR S&P Aerospace & Defense ETF (XAR), tracks an index of U.S. aerospace and defense companies.

The fund currently has $1.01 billion assets under management and invests at least 80% in its holdings. Unlike some of its peer aerospace and defense funds, which tend to focus more on large-cap companies and often the very largest names, XAR aims to achieve a 40/40/20 weighting composition for large-, mid- and small-caps, respectively.

This mix of holdings allows XAR to deliver targeted coverage within the aerospace and defense sector to its investors. Although XAR does not offer options, it has attracted the attention of block traders with its strong underlying liquidity and a reasonable fee of 0.35%.
The fund has quarterly distributions and a dividend yield of 1.09%. This is relatively low when compared to competing funds like ITA (which is also more than four times the size of XAR), but XAR seeks a performance advantage with its focus on relatively smaller companies.

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