La Financière de l'Echiquier launches Echiquier Space, the first European fund to invest in space stocks. An ETF is also being listed in London on this promising theme. The growth prospects seem compatible with environmental issues.
Elon Musk or Jeff Bezos will not say otherwise. Sky is the limit when it comes to the potential of space. And fund managers intend to play their part.
La Financière de l'Echiquier has just announced the launch of the first European investment fund in space stocks. Almost simultaneously, an ETF promoter announced the listing on the London Stock Exchange of an index fund based on this sector.
Record number of orbital launches in 2020
"This is undoubtedly the most promising theme of the coming decades. The space market is already worth $400 billion. And its potential is estimated at 2,700 billion dollars by 2045 by Bank of America Merrill Lynch" says Rolando Grandi, manager of the Echiquier Space fund.
George Saffaye, strategist at BNY Mellon IM, agrees with this view of the growth outlook: "According to Spaceflight Now, the year 2020 saw the highest number of orbital launches in the world since the 1990s, a decade in which Cold War military budgets underpinned the space policies of major Western nations. This positive pace is an interesting prospect for investment. Indeed, the space economy is likely to grow by 6-8 % or more over the next decade, thanks in particular to lower launch costs".
25 to 35 values
La Financière de l'Echiquier's portfolio is composed of 25 to 35 stocks selected from an investment universe of approximately 130 stocks. Only companies with a market capitalisation of over $1 billion are selected, in line with the manager's expectations in terms of stock liquidity.
"We spent three years building this investment universe by talking to industry professionals, start-ups and Amazon's AWS entity"
According to the manager, a distinction must be made between two types of space businesses:"We are in a transition phase between the 1.0 space born during the Cold War, which was rather reserved for States, and the 2.0 space, which is composed of companies born in the last 15 years with a long-term vision, technological innovations and the consideration of ESG criteria. We exclude from our investment universe all 1.0 companies"
ESG criteria
The Echiquier Space fund also excludes arms companies and focuses on the sustainable and responsible aspect of its investments.
"We will be able to benefit fully from this revolution, without ever overlooking the environmental, social and governance issues. Many space technologies contribute to the preservation and improvement of all ecosystems, from managing debris in space to observing the impact of human activity on our planet, to bridging the digital divide"says Rolando Grandi.
In addition to launch technologies and space tourism, hypersonics also looks set for growth in terrestrial operations.
"The design of new aircraft could see the return of hypersonic flight to regular commercial use. Although most such flights ended with the retirement of Concorde over a decade ago, technologies from design to construction have advanced and problems such as sonic bangs at the sound barrier are now solved. This means that the way is clear for hypersonic flight to transform travel even further: flight times will be reduced and distances greatly reduced"George Saffaye (BNY Mellon IM).
Procure Space Ucits ETF
The craze is also spreading to index fund promoters. The specialist in thematic trackers HANetf has just announced the launch of an ETF invested in space stocks. Already listed on the Nasdaq, Procure Space Ucits ETF will be listed on the London Stock Exchange this month, with a distribution passport in Europe, says HANetf on its website.
The ETF is backed by a customized index recognized by the Space Foundation, a US non-profit organization that promotes the space industry.
"Approximately 80 % of the index weighting is allocated to companies generating at least half, but usually all, of their revenues from space activities"HANetf explains.