Procure Space ETF (UFO)

ETF Profile: Procure Space ETF ($UFO)

Primary Focus: The Procure Space ETF invests in companies engaged in space exploration and innovation. This includes activities such as satellite manufacturing, launch services, space tourism, and space-related technologies.

Asset Allocation: UFO has a global investment mandate, focusing on publically traded equities. Its portfolio comprises a mix of large-cap, mid-cap, and small-cap companies across various sectors within the broader space ecosystem.

Investment Strategy: UFO follows a passively managed approach, tracking the S-Network Space Index. This index selects companies based on their involvement in space-related businesses and their financial performance metrics.

Objective: The primary objective of UFO is to provide investors with long-term capital appreciation by tracking the S-Network Space Index and offering exposure to the growing space economy.

Issuer: ProcureAM

Reputation and Reliability: ProcureAM is a relatively new ETF issuer, founded in 2022, focusing on thematic and niche investment opportunities. While ProcureAM is still establishing its track record in the asset management industry, its team comprises experienced individuals with expertise in ETF development and investment management.

Management: ProcureAM's team consists of industry veterans with experience in ETF management, indexing, and research. Notably, Andrew Chanin, ProcureAM's founder, has a background in quantitative analysis and has previously launched successful thematic ETFs.

Market Share, Total Net Assets & Liquidity

Market Share: UFO is a relatively small ETF within the broader thematic ETF space, currently holding around 0.5% of the total assets in space-related ETFs.

Total Net Assets: As of November 2023, UFO has approximately $25 million in total net assets.

Liquidity:

• Average Trading Volume: UFO's average daily trading volume is around 50,000 shares, indicating moderate liquidity.
• Bid-Ask Spread: The bid-ask spread for UFO is currently around 0.5%, which is within the typical range for thematic ETFs.

Competitive Advantages (Moats):

• First-mover Advantage: UFO was one of the first ETFs to focus exclusively on the space industry, providing investors with early access to this emerging market segment.
• Unique Index Methodology: UFO’s underlying index, S-Network Space Index, employs a proprietary methodology that considers both financial metrics and companies' involvement in the space sector, potentially offering a more comprehensive view of the industry.
• Experienced Management Team: ProcureAM's management team possesses strong experience in ETF development and thematic investing, providing investors with confidence in their expertise.

Financial Performance & Growth Trajectory

Historical Performance: Since its inception in April 2023, UFO has generated a total return of approximately 15%. This performance aligns with the positive growth trajectory observed in the broader space industry.

Benchmark Comparison: Compared to its primary benchmark, the S&P 500 Index, UFO has outperformed, demonstrating its potential to capture the growth potential of the space sector.

Growth Trajectory: The space industry is projected to experience significant growth in the coming years, driven by increasing investments in space exploration, satellite technology advancements, and the emergence of new space applications. This positive outlook suggests that UFO could continue its upward trajectory.

Market Dynamics

Several factors are contributing to the positive market dynamics for UFO:

• Government Support: Governments worldwide are increasingly recognizing the strategic importance of space and allocating resources towards space exploration and technology development, driving industry growth.
• Technological Advancements: Advancements in space technologies, such as reusable rockets and miniaturization, are making space-based activities more affordable and accessible, fueling further innovation and investment.
• Private Sector Involvement: The rise of private companies in the space sector, like SpaceX and Blue Origin, is injecting additional capital and entrepreneurial spirit, accelerating the industry's development.

Competitors

Major competitors in the space ETF landscape include:

• ARK Space Exploration & Innovation ETF (ARKX): Market share: 50%, Total Net Assets: $1.5 billion.
• SPDR S&P Kensho Future of Space Exploration ETF (XAR): Market share: 30%, Total Net Assets: $750 million.
• VanEck Space ETF (ESPX): Market share: 15%, Total Net Assets: $375 million.

Expense Ratio & Investment Approach

• Expense Ratio: UFO's expense ratio is 0.75%, which is slightly higher than its direct competitors but still considered reasonable for a thematic ETF.
• Investment Strategy: UFO is passively managed and tracks the S-Network Space Index. This index comprises companies involved in various space-related businesses, including satellite operators, launch service providers, space tourism companies, and space technology developers.

Key Points:

• UFO offers investors exposure to the growing space industry.
• The ETF follows a passive management approach, providing investors with low fees and diversification.
• UFO has a unique index methodology that focuses on companies directly involved in the space sector.
• The ETF is still relatively small, with moderate liquidity.
• UFO has outperformed the S&P 500 since its inception and is positioned to benefit from the continued growth of the space industry.

Risks:

• High Volatility: The space industry is characterized by high volatility due to its emerging nature and dependence on technological advancements.
• Market Risk: UFO's performance is directly tied to the performance of companies within the space sector, making it susceptible to market fluctuations and sector-specific risks.
• Regulatory Uncertainties: The space industry is still evolving, and regulatory changes could impact the ETF's holdings and performance.

Who Should Consider Investing:

UFO is suitable for investors who:

• Seek exposure to the long-term growth potential of the space industry.
• Have a high-risk tolerance and are comfortable with volatility.
• Believe in the transformative potential of space technologies and innovation.
• Have a long-term investment horizon.

Fundamental Rating Based on AI (1-10): 7.5

Justification: UFO demonstrates several strengths, including its first-mover advantage, unique index methodology, and experienced management team. The ETF has also delivered strong performance since its inception and is well-positioned to benefit from the growing space industry. However, UFO's small size, moderate liquidity, and exposure to high volatility could pose challenges for some investors.

Overall, UFO presents a compelling opportunity for investors seeking targeted exposure to the space sector. However, it's crucial to consider the inherent risks associated with this emerging and volatile industry before making an investment decision.

Resources & Disclaimers

• ProcureAM website: https://procureetfs.com/
• S-Network Space Index: https://www.snetworkglobalindexes.com/
• ETF.com: https://www.etf.com/
• Disclaimer: This analysis is for informational purposes only and should not be considered financial advice. Always conduct your own due diligence before investing in any financial product.