---
title: "Defense & Aerospace ETFs nearly doubled in three years. September's losses came from different names"
url: "https://etf.net/news/defense-aerospace-etfs-nearly-doubled-in-three-years-september-s-losses-came-from-different-names-2026-09-21"
published_at: "2026-09-21T14:52:30.632Z"
updated_at: "2026-09-21T14:52:30.632Z"
byline: "ETF.net Research"
---

# Defense & Aerospace ETFs nearly doubled in three years. September's losses came from different names

Defense & Aerospace ETFs were roughly flat in 2026 as of September 21. The iShares U.S. Aerospace & Defense ETF ITA fell 9.9% in a month on GE and RTX; equal-weight XAR fell 11.2%, with no name dominating.

By ETF.net Research. Published Sep 21, 2026.

On Tuesday, September 8, GE Aerospace, the jet-engine maker and the largest holding in the iShares U.S. Aerospace & Defense ETF ITA, agreed to pay **$11.75 billion** for Consolidated Precision Products, a privately held caster of the turbine parts that keep commercial and military engines running. It was a capacity purchase, not a new fighter award. Howmet Aerospace, which makes those same engine and airframe components, fell **10.7%** that session. The next day, Howmet chief executive John Plant said he was "fine" with the deal, even as meeting demand for engine parts is "testing us."

By Monday, September 21, that week sat inside a broader repricing.

Chart: ITA and XAR kept falling through **September 18**

ITA still holds GE as a **20.4%** position and RTX, the missiles, engines, and avionics group, at **16.4%**. Together they are **37%** of the fund. Over the past month ITA lost **9.9%**. Over three years it had returned **98.7%**. Year to date it is down **0.1%**. The SPDR S&P 500 ETF SPY is up **13.4%** in 2026.

The core U.S. aerospace and defense funds fell together in September. The names that did the damage depended on how each fund is built.

## Three U.S. books, three products

The category now includes **26** ETFs, some of them cybersecurity or drone sleeves that will not move with the primes. The decision that still matters most is how the oldest U.S. funds build the same industry.

ITA launched in 2006, holds **$12.5 billion**, charges **0.37%**, and lists 48 holdings. GE, RTX, and Boeing, the commercial-jet and defense manufacturer, are **45%** of assets. The top ten are **74.8%**. Honeywell Aerospace, listed on its own after a June spin-off, is already 3.9%. This is a large-company U.S. aerospace and defense book.

The Invesco Aerospace & Defense ETF PPA is older (October 2005) and more expensive at **0.58%**, with **$7.62 billion** and 62 holdings. It tracks the SPADE Defense Index of companies the issuer describes as systematically important to U.S. defense, homeland security, and government space. RTX is the largest position at **8.2%**. The top ten are **53.6%**. It shares 36 names with ITA and **68.7%** of weight, so it is the closer cousin, with a much smaller GE line (6.8%) and an 11.5% sleeve in technology names that ITA barely touches.

The State Street SPDR S&P Aerospace & Defense ETF XAR is the construction counterweight. It launched in 2011, charges **0.35%**, holds **$6.13 billion**, and tracks the S&P Aerospace & Defense Select Industry Index with a modified equal-weight approach across large, mid, and small caps. RTX is still first, at **3.3%**. Archer Aviation is second, at **3.2%**. The top ten are **30.8%**. Forty-five companies sit in both ITA and XAR, covering 90% of ITA's names, but weight overlap is only **49.3%**. GE is **6.85 times** larger in the iShares fund.

Chart: ITA's **GE** line is 20%, against 3% in XAR

Once the S&P index classifies a company as aerospace and defense, XAR tries to size the names alike, whether the company builds engines or electric aircraft.

Table: Fund, What you own, Assets, Expense, Top holding, Top 10, 1-month, YTD

Returns as of Monday, September 21; holdings as of September 20 or 21. The same month produced a 9.9% loss in the concentrated U.S. fund, an 11.2% loss in the equal-weight fund, and a 5.5% loss in the newer global active fund.

Over three years the established trio still looks like a boom. XAR returned **110%**, ITA **98.7%**, PPA **97.4%**, against **77.3%** for SPY. 2026 is the digestion: all three U.S. core funds are roughly flat to slightly up, while the S&P 500 fund kept climbing. ITA trades **16.7%** below its 52-week high of $256.60; XAR is **19.0%** below $297.79; SPY is **1.5%** below its own high.

## September followed the weighting rules

From the August 18 close through September 18, ITA fell **15.2%** on price. Using current weights, GE dropped 16.2% and subtracted **3.3 percentage points**. RTX dropped 14.0% and subtracted **2.3 percentage points**. Howmet dropped 21.5% and subtracted 1.0 percentage point. Boeing dropped 11.1% and subtracted 0.9 percentage point; it is 7.7% of ITA and is down **8.6%** in 2026. GE and RTX did more of the damage.

XAR fell **17.4%** over that same window, and the hits were scattered because the weights are. Karman Holdings, a 2.3% position, dropped 40%. Axon Enterprise, a 3.1% position, dropped 28%. VSE, a 3.1% position, dropped 26%. Kratos Defense, a 2.6% position, dropped 23%. No single name dominated the way GE dominates ITA. The equal-weight design simply owned more of the smaller names that fell furthest.

PPA fell **12.5%** in the window, less than either peer, because GE is a 6.8% line rather than a 20% line. RTX was still the largest drag, at 1.1 percentage points.

The engine-and-components complex that led the three-year run, and the smaller aerospace names that equal-weight holds, were marked down together. Over the past month, holders pulled **$280 million** from ITA and **$71 million** from XAR. SHLD was nearly unchanged on flows, with **$1.8 million** of net outflows.

## Palantir, Europe, and a $4.3 billion active fund

The Global X Defense Tech ETF SHLD is the product that made defense feel like a technology allocation. It launched on September 11, 2023, now holds **$7.14 billion**, charges 0.50%, and tracks the Global X Defense Tech Index. Palantir Technologies, the software company, is **10.8%**. The next four names are RTX, General Dynamics, Lockheed Martin, and Northrop Grumman. Then the book goes overseas: BAE Systems, Hanwha Aerospace, Rheinmetall, Thales, Leonardo. There is no GE in the top 15, and no Boeing.

That is why SHLD and ITA are not substitutes. They share **14** holdings and **32%** of weight. Palantir returned **52%** over three months; SHLD itself returned **3.7%** over that stretch, while ITA fell **9.1%**. Over one year the tech-and-allies mix has lagged: SHLD is down **5.2%**, ITA is up **5.6%**. Over three years, roughly the life of the Global X fund, SHLD returned **156%**.

Europe is a separate cash-flow stream, and the liquid way to own it is concentrated. The Select STOXX Europe Aerospace & Defense ETF EUAD launched in October 2024, holds **$1.10 billion**, and lists 23 names.

Chart: **Rolls-Royce**, Safran, and Airbus are 59% of EUAD

Year to date EUAD is up **1.6%**; over one year it is down **4.1%**. Over three months it is up **2.2%**, the opposite direction from ITA.

The Themes Transatlantic Defense ETF NATO is the rules-based version of that idea: aerospace and defense companies headquartered in NATO countries, market-cap weighted with capping limits, 90 holdings, a 0.35% fee. RTX, Rolls-Royce, GE, Boeing, and Airbus lead the book. It has **$94.6 million** in assets.

The sleeper in the category is the iShares Defense Industrials fund IDEF, an actively managed portfolio launched on May 18, 2025. In 16 months it has gathered **$4.32 billion**. It holds 141 names, charges 0.55%, and keeps RTX at 6.5% and Palantir at 5.0%. Rolls-Royce, Boeing, Airbus, and a 2.4% line in Space Exploration Technologies sit further down, with GE at only 1.8%. Year to date it is up **3.8%**, the strongest 2026 result among the large funds, and it fell **5.5%** over the past month, the mildest drawdown in that group. Sixteen months is too short to judge the process. The fund is already too big to treat as a footnote, especially in a month when the older U.S. trackers were seeing outflows.

## The budgets did not go away

At the 2025 Hague Summit, NATO allies committed to invest **5%** of GDP annually on defense by 2035: **3.5%** for core defense and **1.5%** for related security spending. That is a decade-long policy path.

The European Defence Agency, in a July 16 release, said EU-27 defense spending reached **€418 billion** in 2025, up 20% from 2024, and projected **€454 billion** in 2026. That would be 2.4% of EU GDP, from 2.2% in 2025. Defense R&D is expected to rise from €17 billion to €20 billion. Spending of that size can support European champions and U.S. suppliers that win export work.

U.S. commercial aerospace is a second cycle inside the same ETFs. Boeing is still a top-three holding in ITA and PPA, and it is down 8.6% this year. GE’s engine installed base serves airline fleets and militaries at once.

A fund that looks like a Pentagon proxy on the fact sheet is, in practice, a blend of procurement, propulsion aftermarket, and factory execution.

Source: etf.net, https://etf.net/news/defense-aerospace-etfs-nearly-doubled-in-three-years-september-s-losses-came-from-different-names-2026-09-21. Please cite the page URL.