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.
The BFF Take
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
ITA
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
PPA
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
XAR
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
Frequently Asked Questions
Which defense ETF is best: ITA, PPA, or XAR?
For cost-conscious long-term investors, XAR wins at 0.35% with equal weighting. For investors who prioritize historical Sharpe ratio and broader supply chain exposure, PPA's 58-stock portfolio has delivered better risk-adjusted returns over its 20-year track record. For maximum liquidity and prime contractor concentration, ITA's $12B AUM and market-cap weighting is the right choice. The decision depends on whether you optimize for cost, risk-adjusted returns, or prime contractor exposure.
Why have defense ETFs performed so well in 2025-2026?
NATO members have committed to significantly higher defense spending targets, and European governments have authorized historic budget increases. Geopolitical tensions have sustained elevated procurement spending across multiple programs. ITA returned approximately +49% in the trailing 12 months; XAR returned +44%; PPA returned +32%. The divergence reflects ITA's prime-contractor concentration capturing larger gains when the biggest defense companies lead. Past performance does not guarantee future results.
Do ITA, PPA, and XAR include international defense companies?
No. All three funds hold US-listed companies only. None includes international defense companies like BAE Systems (UK), Rheinmetall (Germany), Thales (France), or Leonardo (Italy). Investors seeking exposure to the European defense spending surge specifically would need a different vehicle. The three funds provide pure US aerospace and defense exposure.
Should I own more than one of ITA, PPA, or XAR?
Holding multiple defense ETFs provides minimal diversification benefit because all three own largely the same US defense companies. Overlap between ITA, PPA, and XAR is high: Lockheed Martin, Raytheon Technologies, Northrop Grumman, L3Harris, and General Dynamics appear in all three. Owning two or three of these funds mostly increases transaction costs and complexity without meaningfully changing your exposure. Pick one based on your cost, construction, and liquidity preference.
Past performance does not guarantee future results. Fund data is approximate and may not reflect current holdings or returns. Nothing on ETF BFF is personalized financial advice. ETF BFF may receive compensation from brokerage partners referenced on this site.