Pacer Solactive Whitney Future of Warfare ETF (FOWF)

“Modern warfare is no longer won by numerical superiority alone, but by technological edge — and that gap widens the wealth of companies that engineer the future of conflict.”

The Pacer Solactive Whitney Future of Warfare ETF bets on that premise. It invests in publicly traded companies whose products and services define the next generation of military capability: not the ships and aircraft of the past, but the software, sensors, autonomous platforms, and cyber defences that will characterise defence in the coming decades.

What the fund holds and why

FOWF constructs a portfolio drawn from the defence and aerospace industrial base. The holdings include traditional defence contractors — the large, established firms that build missile systems, fighters, and electronic warfare equipment — but also newer, smaller companies focused on emerging domains: unmanned systems, artificial intelligence for military applications, satellite communications, space launch, hypersonics, and cyber warfare. The fund tracks a custom index designed to capture what the sponsor (Pacer) and index provider (Solactive) define as “future of warfare” exposure.

The logic is that geopolitical friction, technological advancement, and the shift from land-based Cold War doctrine toward multi-domain conflict (air, sea, space, cyber) will drive sustained demand for innovation in defence. A drone manufacturer, a satellite operator serving military customers, a software firm building network-defence platforms, and a traditional shipbuilder will all benefit, albeit in different ways and on different timelines.

The portfolio is weighted by market capitalisation, which means the largest defence contractors dominate the holdings. Mega-cap players like Boeing, Lockheed Martin, and Northrop Grumman appear prominently, anchoring the fund’s returns. Mid-cap and smaller companies — the specialist firms building cutting-edge systems — add diversification and growth potential, though with more volatility.

The defence cycle and structural drivers

Defence spending is driven by budgetary cycles, geopolitical events, and political consensus. The U.S. federal government remains the largest defence spender globally, and its appropriations — shaped by Congressional debate, emerging threats, and strategic doctrine — set the pace for the private contractors that supply it. When geopolitical tension rises or a new military capability gap is identified, defence budgets tend to expand; during periods of relative quiet, they face pressure to contract.

For investors, this cyclicality matters. FOWF’s returns depend partly on whether defence budgets are growing or shrinking, and partly on whether technology spending within those budgets is rising or falling. A scenario where total defence budgets are flat but innovation budgets are growing (as the U.S. pivots toward peer competitors with advanced technology) can still be positive for a fund tilted toward next-generation systems. Conversely, if the political mood turns isolationist or the economy contracts sharply, defence spending can fall and drag the fund with it.

Risks and concentration

A defence-focused ETF carries specific risks distinct from the broader market. First, it is geopolitically sensitive — elections, treaties, and international crises move the entire sector in lockstep. Second, it is exposed to single-customer risk: the U.S. government (and allied governments) together account for a huge portion of the industry’s revenue. A change in military doctrine, a shift in appropriations, or a decision to cancel a major platform can instantly threaten multiple portfolio companies.

Third, large defence contractors operate long supply chains with embedded regulatory and compliance requirements. Disruption to suppliers, failures in programme execution, or regulatory setbacks can delay revenue recognition and disappoint investors. The companies are also subject to scrutiny around foreign sales, technology export controls, and ties to controversial military actions — factors that can introduce political or legal risks not present in other sectors.

Structure and trading

Pacer Solactive Whitney Future of Warfare ETF trades on the NASDAQ under the ticker FOWF. Like most ETFs, it is bought and sold during market hours at the prevailing market price. The fund is structured as an open-end fund, with shares created and redeemed throughout the day by authorised participants.

The expense ratio for a speciality sector ETF typically ranges from 0.40% to 0.70% annually. That is higher than a broad market index fund but lower than an actively managed mutual fund, reflecting the cost of maintaining the thematic mandate and rebalancing the portfolio.

Dividend and total return

Many large defence contractors pay substantial dividends, and FOWF captures those cash flows. The fund distributes dividends quarterly, and the yield (the annual dividend as a percentage of share price) will reflect the weighted yield of the underlying holdings. For income-focused investors, this is a material component of total return; for growth-oriented investors, it is a secondary consideration.

Who it is for and how to evaluate it

FOWF is designed for investors with a conviction that defence technology will outperform the broader market, either because geopolitical risks are rising or because innovation in military systems is accelerating faster than the public market has priced in. It suits tactical portfolio tilts by sophisticated investors and long-term holders comfortable with geopolitical and cycle risk.

To evaluate the fund, start by reviewing the prospectus and fact sheet. Compare FOWF’s performance to a broad market index and to a general defence sector index (e.g., the defense subsector of the S&P 500) to see whether the “future of warfare” tilt is actually capturing excess returns or simply tracking a narrower, more volatile subset. Examine the top 10 holdings and understand what makes each one a “future of warfare” play versus a traditional defence company.

Monitor defence budgets, Congressional appropriations, geopolitical developments, and the strategic documents from the Department of Defence. These shape the long-term opportunity set for the fund. And be clear about your own thesis: are you betting on higher absolute defence spending, on a shift in what gets funded within defence, or simply on the belief that defence contractors will outperform equities broadly? Your answer will tell you whether FOWF is the right vehicle.