ProcureAM co-founder and CEO Andrew Chanin joins Wealth! for Yahoo Finance Space Week to provide tips for investing in the space industry.
Chanin explains that because it can be difficult for investors to understand all the companies with exposure to the space industry, a space-traded stock fund (ETF) that consolidates such companies can be a useful tool. However, ProcureAM’s founder says managing an ETF is “extremely important” and investors should look for an “executable” plan from fund managers.
Chanin adds that the companies included in Procure’s recent space ETF (UFO) are companies that “[enable] space technologies to create something that might help consumers. But then you also have other companies that are involved in areas like rocket launch, like Rocket Lab (RKLB) … where these types of companies not only help get things to space, but hopefully help drive down the cost and access to space as well .”
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This post was written by Nicholas Jacobino
Video transcription
Well, investors have more space ETFs to choose from than ever before, but which ones might be worth exploring.
A standout is the purchase of A MS, Procure ASA UFO and ETF focused on space exploration, which were launched in 2019. For more information on how we can play the space sector, we have Andrew Chan, who is co-founder and CEO of Procure. AM as part of Yahoo funds space.
We are happy to have you here with us today.
Andrew, first of all, let us walk into the UFO.
The components that you use to really ensure that this is a well-rounded approach to a thematic ETF of the space.
So when we decided that we wanted to launch UFO as the world’s first pure play global Space ETF, one of the really important factors for us was choosing an index that we believe represents the space industry and whose rules and methodology are on one were in line with finding these pure play companies.
So the index was actually co-developed by a former Space Foundation research director, Michael Walter Range, where he had actually helped them build and develop the calculations that the Space Foundation uses to determine annual size growth and species. of companies and technologies that span the entire space economy.
So, you know, having a team of individuals who are very familiar with both indexing and ETFs and the space industry itself was, we think, a way to really differentiate this approach to really find companies that come out of this.
For this fund, more than 80% of the fund is focused on companies that generate the majority of revenue from space.
So as the previous segment said, companies that deal with launches, satellites, communications and many other types of areas, such as defense, that are becoming extremely important to the overall space industry today.
I mean, some of these companies are space plays, some of them are space dependent.
I think what is the best evaluation that investors should really deploy when trying to figure out the exposure that a company should have to make their investment decision.
So this index team actually does a significant amount of research to determine where these different companies’ revenues come from.
So, you know, some of those names that you just mentioned, some of those companies are space-dependent companies, which means if you take space out of the equation, like a GPS-focused company like Garmin, their products just don’t work.
So these are companies that are enabling space technologies to create something that might help consumers.
But then you also have other companies that are involved in areas like rocket launch, like the rocket lab that was mentioned in the previous segment, where you know these types of companies are helping, not just getting things to space, but hopefully helping to get to space to lower. also the costs and access to the use of space.
So there are many different types of space companies.
I think we’ve seen a lot of spec companies emerge over the last few years and some of them weren’t necessarily ready for, you know, the public markets and didn’t necessarily bring their companies to market at the best time. or with the best kind of um, you know, financing behind it to really drive it to the next phase of those companies’ growth.
But as some of these companies are establishing themselves and really focusing on the management and direction of the companies and trying to get contracts, they’re actually in this new phase of their own development.
So it’s very important to understand the different types of companies that are out there, but it’s difficult. That’s why an ETF can be interesting because something like UFO offers access to more than 30 listed companies from all over the world. .
But management is extremely important and understands that they have a plan that is executable and in some cases, you know, some companies are completely dependent on government contracts from or from space organizations like NASA or the ES A in Europe.
Um, some companies are more diversified and have both commercial customers and government contracts that are exclusively focused on commercial consumer contracts.
So those who have diversification may be able to weather different storms differently.
And finally, Andrew, we only have about 30 seconds here.
How can you protect against volatility, volatility in the form of not getting one of those big contracts from a government or volatility in the event that a launch goes bad or things have to be rescheduled.
Yes.
So all these factors can be very important for their viability for space companies. That’s why we think investors might be interested in using something like an ETF that provides that diversification on a company basis.
Um While different companies may have insurance policies or other things that can protect against specific risks of individual launches.
Um Every company is in its own current phase of its own growth cycle.
Um And it’s, it’s, it’s hard.
So certainly other forms of hedging, such as using options and the like, can be a way to hedge against that, for example investing in the broader space industry.
UFO provides, you know, a way that might be interesting for certain investors to get access to a lot of companies that are doing different things in the industry.
Andrew Chan and co-founder and CEO of Procure, and thank you so much for taking the time here.
Appreciate it.
Thank you.