Andrew Chanin, co-founder and CEO of ProcureAM, joins Wealth! for Yahoo Finance Space Week to offer tips on investing in the space industry.
Chanin explains that it can be difficult for investors to keep track of all the companies involved in the space industry, so a space ETF that aggregates them can be a useful tool, but Procure AM’s founder says that ETF governance is “critical” and investors should look out for an “actionable” plan from the fund manager.
Chanin said companies included in Procure’s recent Space ETF (UFO) are:[enable] They use space technology to create things that are useful to consumers. But they also have companies involved in areas like rocket launch, like Rocket Lab (RKLB). These companies are not just bringing things into space, they’re helping to lower the cost and access to space.”
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This post Nicholas Jacobino
Video Transcript
Investors have more space ETFs to choose from than ever before, but which ones are worth considering?
Notable holdings include Procure A MS, Procure ASA UFO, and ETFs focused on space exploration, both launched in 2019. To learn more about how to play in the space sector, we spoke to Andrew Chan, co-founder and CEO of Procure AM, a Yahoo Finances Space subsidiary.
Thank you so much for joining us today.
Andrew, first of all, take us to UFOs.
These are the components we are leveraging to ensure that this is a holistic approach to space thematic ETFs.
So when we decided to launch UFO as the world’s first pure global space ETF, one of the very important factors for us was choosing an index that we thought was representative of the space industry and whose rules and methodology were consistent with finding pure companies.
The index was co-developed by Michael Walter Range, former Director of Research at the Space Foundation, who helped construct and develop the calculations the Space Foundation uses to determine the annual growth in size and variety of companies and technologies across the space economy.
So, you know, we think that putting together a team of people who are familiar with both indexes and ETFs, and the space industry itself, was how we really differentiated this approach and found the companies that are really delivering.
In this fund’s case, over 80% of the fund is concentrated in companies that derive the majority of their revenue from space.
As we mentioned in the previous segment, you know, there are companies involved in various areas such as launch business, satellite business, communications business, and even defense that are extremely important to the entire space industry today.
So some of these companies have space operations and some are space dependent.
What do you think is the best valuation that investors should really adopt when they’re trying to figure out what level of exposure a company has to space in order to make an investment decision?
So this index team really does a fair amount of research to determine where the revenues of different companies are coming from.
Well, some of the names I mentioned earlier are space-dependent, meaning that if you don’t take space into account, a GPS-focused company like Garmin’s products won’t work.
In other words, these are companies that use space technology to create things that benefit consumers.
But there are other companies out there that are involved in areas like rocket launch, such as Rocket Lab, which we mentioned in the previous segment. These types of companies are not only helping to bring things into space, but also helping to lower the cost and access to space.
So, there are many different types of space companies.
Over the last few years, a lot of startups have been created, but some of them weren’t necessarily ready to go public, they didn’t necessarily launch at the best time, they didn’t necessarily raise the best amount of capital, and they weren’t able to take their growth to the next level.
However, some of these companies are settling down, getting serious about their management and the direction of their companies, and closing deals, and so they are in a new phase, so to speak, of their development.
So understanding the different types of companies that are out there is really important, but it can be hard, which is why ETFs like UFO are interesting, providing access to over 30 publicly listed companies from around the world.
But management is crucial and knowing that you have a workable plan.Also, some companies may be entirely dependent on government contracts from space agencies such as NASA or Europe’s ES A.
Well, some companies are becoming more diversified and have commercial clients as well as government contracts that focus solely on consumer commercial contracts.
Thus, diversifying companies may be able to weather different storms in different ways.
And finally, Andrew, we only have about 30 seconds.
How do you protect against instability, like the instability of not getting a major government contract, or the instability of a launch going wrong and having to reschedule at that point?
yes.
So all of these factors could be very important to the survival of space companies, and so we think investors may be interested in using something like an ETF to provide company-based diversification.
Hmm, on the other hand, different companies may have insurance and other things that protect them against the particular risks of their individual launches.
Well, every company is at its own stage in its growth cycle.
Hmm, that’s difficult.
Therefore, other types of hedging opportunities, such as the use of options, may be a way to hedge against investments in the broader space industry.
UFOs offer an interesting way for certain investors to gain access to a lot of companies doing different things across industries.
Andrew Chan, co-founder and CEO of Procure, thank you so much for your time today.
appreciate.
thank you.
