ITA vs PPA vs XAR: Best Defense ETF for 2026?
Three different approaches to the same booming sector. ITA concentrates in prime contractors. PPA spreads across the full supply chain. XAR equal-weights every company and costs the least.
ITA vs PPA vs XAR: Side-by-Side
| ITA | PPA | XAR | |
|---|---|---|---|
| Full name | iShares U.S. Aerospace & Defense ETF | Invesco Aerospace & Defense ETF | SPDR S&P Aerospace & Defense ETF |
| Issuer | iShares | Invesco | State Street |
| Expense ratio | 0.40% | 0.58% | 0.35% |
| AUM | $12B | $8B | $6B |
| Holdings | 35 stocks | 58 stocks | 34 stocks |
| Weighting | Market-cap weighted | Modified market-cap | Equal-weight (quarterly rebalance) |
| Inception | 2006 | 2005 | 2011 |
| 1-year return | +48.9% | +32.4% | +44.4% |
| 3-year return | +18.2% | +16.8% | +17.5% |
| 5-year return | +22.1% | +20.5% | +21.3% |
Returns approximate and subject to change. Past performance does not guarantee future results.
XAR wins for most long-term defense investors. At 0.35%, it is the cheapest of the three. Its equal-weight methodology forces quarterly rebalancing across the full defense supply chain, capturing gains from mid-cap suppliers, munitions makers, and electronics firms alongside prime contractors. Over most full market cycles, equal weighting has outperformed market-cap weighting in sector ETFs. PPA has the longest track record (2005) and its 58-stock portfolio has historically delivered the best Sharpe ratio of the three. For investors who specifically want the risk-adjusted performance record, PPA has earned its 0.58% expense ratio. ITA is the right choice for maximum liquidity and pure prime contractor concentration: at $12B AUM, its bid-ask spreads are the tightest, and its 1-year return of +49% reflects the advantage of prime-contractor concentration in the 2025-2026 NATO spending surge. The specific winner depends on your investment horizon and construction preference, but for a long-term defense allocation, XAR's cost advantage and rebalancing discipline are the most durable edge.
Who Each Fund Is Built For
Best for
- Maximum liquidity and tight spreads
- Concentration in Lockheed, Raytheon, Northrop
- Investors who want prime contractor dominance
- Largest AUM at $12B — easiest to trade
Best for
- Longest track record (since 2005)
- Best historical Sharpe ratio of the three
- Broadest supply chain exposure (58 holdings)
- Investors who value risk-adjusted returns over raw cost
Best for
- Lowest cost at 0.35%
- Equal-weight rebalancing discipline
- Long-term defense sector core position
- Investors who want to avoid prime contractor concentration