Two space-focused ETFs charge the same 0.75% fee but differ sharply in sector exposure, liquidity, and concentration risk-especially in their allocations to SpaceX-raising key questions for investors seeking growth beyond Earth
Investors looking to tap into the commercial space sector now have a choice between two high-growth exchange-traded funds: the ARK Space & Defense Innovation ETF and the Tema Space Innovators ETF. Both funds aim to capture the expansion of private space ventures, but their strategies, sector exposures, and risk profiles diverge in ways that matter for portfolio construction.
While the space industry was once dominated by government agencies, private capital has fueled a new era of satellite launches, orbital infrastructure, and commercial applications. As more companies enter the sector, ETFs targeting space innovation have become a practical way for investors to gain diversified exposure without betting on a single stock.
Fee Structure and Asset Size
Both the ARK Space & Defense Innovation ETF and the Tema Space Innovators ETF charge a 0.75% expense ratio, which is on the higher end for ETFs but typical for actively managed thematic funds. Despite being the newer entrant, Tema's fund has quickly amassed $1.3 billion in assets under management (AUM), outpacing ARKX's $933.6 million. This difference in AUM can affect trading liquidity and bid-ask spreads, which are important for investors who may need to enter or exit positions efficiently.
Trading volume is another key distinction. Tema's ETF sees significantly higher average daily trading volume, which can translate to tighter spreads and lower transaction costs for investors. For those who prioritize liquidity, this may tilt the balance in favor of Tema, especially during periods of market volatility.
Portfolio Composition and Sector Exposure
The two funds take notably different approaches to portfolio construction. ARKX, managed by ARK Invest, maintains a heavy tilt toward the industrials sector, with 63% of its holdings in that category, followed by technology at 21% and consumer cyclical at 9%. Its portfolio includes 45 holdings, with SpaceX accounting for 9%, Kratos Defense & Security at 7.41%, and L3harris Technologies at 7%.
Tema Space Innovators ETF, on the other hand, is more concentrated in its top positions. SpaceX makes up 20.14% of the fund, Rocket Lab 11.09%, and Viasat 6.18%. The fund holds 38 securities and is actively managed to capture opportunities across satellite operations, launch services, and other commercial space activities. This higher concentration in a single company-especially a private one like SpaceX-can amplify both upside potential and downside risk.
Concentration Risk and Investor Considerations
One of the most significant differences between the two ETFs is their exposure to SpaceX. While both funds count SpaceX as their largest holding, Tema's 20% allocation introduces a level of concentration risk that may not suit all investors. If SpaceX's valuation were to decline or if the company faced operational setbacks, the impact on Tema's ETF would be much greater than on ARKX, which limits SpaceX exposure to 9%.
For investors with a lower risk tolerance or those seeking broader diversification, ARKX's more balanced sector allocation and lower single-stock exposure may be preferable. On the other hand, investors who are bullish on SpaceX and comfortable with higher volatility might find Tema's approach more appealing. As with any thematic ETF, it's important to consider how these funds fit within an overall portfolio and whether their risk profiles align with long-term goals.
According to reporting by financialsumo.com, the rise of thematic ETFs has also been fueled by social media, where retail investors often seek out high-growth opportunities. For a deeper look at how online financial advice can influence investment decisions-and the risks that come with it-see this analysis of what to trust and what to ignore in viral money tips.
Understanding Thematic ETF Risks
As of early 2026, the global space economy is projected to surpass $1 trillion within the next decade, according to industry estimates. Thematic ETFs like ARKX and Tema Space Innovators offer a way to participate in this growth, but they also come with unique risks. High expense ratios, sector concentration, and exposure to private companies can all affect returns and volatility. Investors should also be aware that thematic funds may underperform broader market indexes during periods when their targeted sector falls out of favor.
Thematic ETFs are designed to capture specific trends or industries, but their performance can be highly cyclical. Unlike broad-based index funds, they may lack diversification across sectors and geographies, making them more sensitive to regulatory changes, technological disruptions, or shifts in investor sentiment. Before investing, it's essential to review the fund's holdings, understand its methodology, and consider how it complements other assets in your portfolio. For those new to thematic investing, consulting a financial professional can help clarify whether these funds align with your risk tolerance and investment objectives.
