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Larry Fink’s entire 2026 letter focused on this infrastructure shift (From Awesomely, LLC)

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2 Actively Managed Defense ETFs That Can Pivot as the War Evolves

Written by Nathan Reiff on April 1, 2026 

Key Points

• Two prominent actively managed ETFs holding defense stocks have surged in recent months even as the broader market has faltered.
• IDEF has wide latitude in seeking out global defense names, giving it excellent room to pivot in light of new information related to geopolitical conflicts.
• ARKX is a space-focused fund that has considerable overlap with defense industry names as well.
• Special Report: The 7 Questions Sophisticated Investors Ask Before Hiring an Advisor (From SmartAsset)

With actively managed exchange-traded funds (ETFs) growing increasingly popularrelative to traditional passive funds, investors may find that these ETFs can give an advantage when it comes to highly timely investment issues, such as those related to the ongoing Iran war. A key benefit of many active funds is that managers can make portfolio adjustments in real time and in response to developments in the market—many passively managed funds are linked to indices that may only be rebalanced periodically.

Investors do typically have to pay more in annual fees for active management, but actively managed funds may be well worth the additional cost if they are able to successfully generate stronger performance in a fast-moving investment landscape. To be sure, the conflict in Iran is exactly that type of scenario: with near-constant updates on the United States’ goals and strategy, not to mention the major upheaval taking place within the energy market, defense stock investors must be nimble and responsive in order to make the best decisions from day to day. The active defense ETFs below may be a good place to start for those looking to outsource these moves.

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A Broad International Defense and Security Fund, but With Minimal Performance History

The iShares Defense Industrials Active ETF (NASDAQ: IDEF) has a broad mandate focused on companies that could benefit from an increase in global defense and security spending. As such, it can hold a portfolio of aerospace, defense, infrastructure, and cybersecurity firms on a global scale, although close to 60% of the basket is made up of U.S.-based stocks. Other leading countries represented include South Korea, the United Kingdom, and Japan, among others.

IDEF’s stocks tend to be those that could get a boost from an increase in government defense spending as a result of geopolitical turmoil—this makes it particularly responsive to unique conflicts like the wars in Iran and Ukraine, for example.

The fund holds around 111 stocks, with the largest 10 occupying more than 42% of its portfolio—these include major U.S. defense and security names like RTX Corp. (NYSE: RTX) and Lockheed Martin Corp. (NYSE: LMT), although international companies like Rheinmetall (OTCMKTS: RNMBY) and Mitsubishi Heavy Industries Ltd. (OTCMKTS: MHVYF) also commonly feature in the top holdings.

Despite its fairly heavy focus on a small number of big names, IDEF is among the more broadly diversified defense ETFs available. It is also surprisingly inexpensive for an actively managed fund, with an expense ratio of only 0.55%. What IDEF does not have, however, is a long track record of success. The fund was only launched in May 2025, so it does not even have a full year of performance history as of this writing. Still, since launch, it has returned more than 25%, and that is despite a 15% selloff in the last month amid the broader market decline.

A Space-Focused Fund With a Defense Angle

The ARK Space Exploration & Innovation ETF (BATS: ARKX) is unique in that it accesses some defense names within the broader confines of a space-centered theme. There is, of course, significant overlap between space technology firms and the defense industry—companies focused on intelligent devices, autonomous mobility, reusable rockets, and similar innovations may be likely to find business in both of these spaces.

The universe of companies in the purview of ARKX is small, and the fund holds under three dozen unique positions, meaning that it is fairly concentrated. It also carries a somewhat higher expense ratio compared to IDEF, as it charges an annual fee of 0.75%.

Investors should beware that ARKX is less of a pure-play approach to defense compared to IDEF, including more mainstream companies like Amazon.com Inc. (NASDAQ: AMZN) and Alphabet Inc. (NASDAQ: GOOG), although in lower concentrations than many of the key defense players in its portfolio.

The fund has a longer history than IDEF, with five years since its launch date and a one-year total return of almost 60%. Like IDEF above, this is after a decline—in the case of ARKX, by about 13%—in recent weeks.

With a narrower focus on space stocks, it may be less likely that ARKX will make immediate changes to the list of companies it invests in than it is that the fund managers will tweak the portfolio allocations in response to news updates. Still, even adjusting weighting can make a major difference in the returns that ARKX is able to secure in a rapidly shifting market.

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