Europe is taking back control:
Europe must strengthen its defence capabilities. With rising geopolitical tensions and shifting alliances, European nations are making unprecedented investments in military readiness and strategic autonomy.
European defence spending has long fallen short of NATO’s recommended target of 2% of GDP. This has left a significant gap in military readiness, putting Europe’s security at risk.
For decades, Europe has relied on US security guarantees but recent global developments—including the invasion of Ukraine and evolving US foreign policy—have made one thing clear: Europe must take control of its own defence future and plug this defence spending shortfall…fast.
With fractious global relationships, the expectation is that European defence spending will be geared towards European companies, with the President of the European Commission stating, “We must buy more European.”1
Why now?
How will Europe fund its defence expansion?
What does this mean for investors?
The shift is already happening. Governments are actively working with private investors to accelerate procurement of next-gen defence technologies—including cyber warfare, AI-driven security, and aerospace advancements.
The urgency has been reflected in stock prices, with European defence stocks climbing since 2022. Over the last year, European defence stocks have risen 40.8%, outpacing broader European equities (+11.4%)5. But this is just the beginning, with President Trump’s February announcement that he could look to cut military spending by half providing an unprecedented catalyst for European defence companies. With record-high order books, long-term government contracts, and a push for strategic self-sufficiency, the sector presents an investment theme that is not just timely—but inevitable.
Europe is entering a new era of security and defence. As governments commit to long-term military expansion, investors now have a unique opportunity to be part of this historic transformation.
The WisdomTree Europe Defence UCITS ETF (WDEF) is the world’s first exchange-traded fund (ETF) to focus solely on European companies, giving it a potential edge versus global strategies that typically have far greater US revenue exposure and, therefore, are exposed to US defence spending restrictions. The WisdomTree Europe Defence UCITS ETF (WDEF) offers investors the opportunity to capitalise on the growth potential of European defence stocks across the European defence value chain, providing exposure to leading European defence companies.
The WisdomTree Europe Defence UCITS ETF
The ETF favours companies with:
This methodology, and hyper focus on Europe, has resulted in outperformance (when using backtested data) vs peers who offer global exposure:
Source: WisdomTree, Bloomberg, from 31 December 2020 to 19 February 2025. SCH stands for Since Common History starting from 31 December 2020, which is the earliest available date for the peer indices. Return figures for time periods longer than 1 year are annualised. WisdomTree Europe Defence UCITS Index (WTEUDEFN) calculations include back tested data and are computed in the USD. Historical returns of other indices are also calculated in USD. Backtest disclosure: WTEUDEFN uses the static datasets as of 31 October 2024, which are not redefined retrospectively in the backtest process. Such datasets including the initial universe of companies, and their revenue data, category classification, and companies' ESG assessment, as well as companies' market capitalisation and daily dollar volume requirements. Calculations are using Bloomberg PORT function on and on GTR (gross total return) basis. You cannot invest directly in an index. Historical performance is not an indication of future performance and any investments may go down in value.
Important Information
access this unique investment opportunity with the world’s first European Defence ETF
Defence budgets are soaring
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Defence budgets are soaring -
more NATO members than ever are meeting or exceeding the 2% GDP target for military spending. Some, like Poland, are pushing beyond 4%2.
Next: Modernisation is urgent
1 Speech by President von der Leyen on European defence at the Royal Danish Military Academy on 18 March 2025.
2 NATO 2023 Vilnius Summit Declaration.
3 European Commission: Joint communication to the European Parliament, the Council as of August 2024.
4 Mark Rutte NATO Secretary General.
5 Bloomberg, Europe defence stocks are represented by the MSCI Europe Aerospace & Defence Index and European Equities represented by MSCI Europe Index.
6 European Defence Agency, August 2024.
Higher defence revenue exposure:
Higher Europe exposure:
Aerospace and defence sector exposure:
Ensuring WisdomTree’s strategy is more closely aligned with European defence realignment than a purely market cap weighted approach.
You will not get there with the 2 percent4
Mark Rutte
NATO Secretary General
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Modernisation is urgent
Strategic autonomy is the goal
much of Europe’s defence infrastructure still relies on outdated Cold War-era equipment, spurring a major push for advanced technology and homegrown defence systems.
Modernisation is urgent -
Next: Strategic autonomy is the goal
the EU aims to spend at least 50% of procurement budgets within Europe by 2030, rising to 60% by 2035 to reduce reliance on external powers3.
Strategic autonomy is the goal –
Next: Defence budgets are soaring
With high sovereign debt levels, Europe is exploring new funding solutions:
EU defence bonds
inspired by the NextGenerationEU pandemic recovery fund
Nothing is off the table
Ursula von der Leyen
President of the European Commission
Budget reallocations
redirecting existing EU funds to military projects
Private investment and public-private partnerships
encouraging private investment in cutting-edge defence technologies
+40.8%
Performance of European defence stocks in the past year
Performance of broader European equities
+11.4%
Higher defence revenue exposure:
Higher Europe exposure:
Aerospace and defence sector exposure:
Ensuring the ETF is more directly positioned to benefit from increasing defence expenditure in Europe and less exposed to potential US defence spending reductions.
The European Defence Agency (EDA) provided an analysis of defence investment gaps, which showed that core defence products have seen the most underinvestment during recent periods of peace6. The ETF invests in companies with product exposure to the Land (for example, vehicles) and Air (for example, air defence, drones) domains that are well positioned to benefit from these European priorities.
Backtested index performance
Europe defence spending is surging
Capture this untapped growth opportunity now with the WisdomTree Europe Defence UCITS ETF (WDEF)
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