U.S. Defense ETF Surpasses $15 Billion as Investor Inflows Accelerate

iShares U.S. Aerospace & Defense ETF US4642887602

The iShares U.S. Aerospace & Defense ETF (ITA) has set a new record, with its market capitalization climbing to $15.59 billion. This milestone underscores a powerful decade-long performance, during which the premier defense-focused exchange-traded fund has delivered an annualized return of 15.9%, outperforming the broader market by approximately 2.3 percentage points each year. The recent surge in assets prompts an examination of the drivers behind this significant capital movement.

A sharp intensification of investor interest in American defense contractors became evident in the third week of February. Remarkably, over just a five-trading-day period ending last Tuesday, the fund attracted net inflows of $375.81 million. Zooming out to the past month, the net asset growth totals a substantial $1.27 billion, reflecting a major reallocation of capital by market participants toward U.S. defense equities.

Industry Titans Anchor the Portfolio

ITA employs a concentrated strategy, with its top ten holdings accounting for roughly three-quarters of the total portfolio weight. GE Aerospace constitutes the largest position at 20.11%, with RTX Corporation following at 16.43%. Boeing secures the third spot with an 8.32% weighting. Other foundational holdings include Lockheed Martin (5.37%), Howmet Aerospace (5.01%), Northrop Grumman (4.93%), and L3Harris Technologies (4.68%). This focus targets the sector's primary contractors.

Record Backlogs Fuel Expansion Plans

The swelling fund volumes mirror the industry's solid fundamental outlook. Global military expenditure is projected to rise by 8.1% this year, reaching $2.6 trillion. To address an estimated record order backlog of $747 billion—which has expanded by 25% over the last two years—the five leading U.S. manufacturers have outlined collective investment plans totaling $10.08 billion for 2026. These capacity expansions form the operational foundation for converting historic backlogs into future revenue.

In a competitive context, the ETF positions itself in the middle of the price spectrum with a total expense ratio of 0.38%. While rival products, such as the SPDR S&P Aerospace & Defense ETF (0.35%), may have a greater emphasis on mid-cap companies, the iShares fund deliberately concentrates on the large-cap primary contractors. The planned industrial capacity increases for 2026 are now seen as the key to unlocking the value of these unprecedented order books.