ETF Talk

This Aerospace and Defense Fund Gets the Job Done

The PowerShares Aerospace & Defense ETF (PPA) is a smaller exchange-traded fund (ETF) than the two “big guns” in the aerospace and defense sector — the SPDR S&P Aerospace & Defense ETF (XAR) and the iShares U.S. Aerospace and Defense ETF (ITA) — but the mighty mite has generated some substantial returns this year.

This fund offers a traditional take on a market sector by investing in defense companies. The defense industry makes up about 5% of U.S. gross domestic product (GDP).

The fund allocates to the companies it holds by using a market-cap-weighting strategy. As a result, more than half of PPA’s assets are invested in large-cap securities, with mid-caps making up another 35%.

The companies held in the portfolio range between value and growth, with a greater percentage of the companies characterized as growth investments, but only narrowly so. This fund pays out a dividend yield of slightly more than 1%, while the expense ratio comes in at around 0.6%. Assets managed currently total $775 million.

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