iShares U.S. Aerospace & Defense ETF (ITA)

Cap-weighted defense-prime ETF — the largest and cheapest aerospace/defense fund, but the space exposure is a rounding error. Include only when defense-prime exposure is the goal, not as a space hedge.

Investment Research · Photoncap-style deep dive · Bucket E v1 · 2026-05-22

What this ETF tracks

ITA tracks the Dow Jones U.S. Select Aerospace & Defense Index, a modified cap-weighted index of US aerospace and defense companies. Constituents are drawn from the Dow Jones U.S. Broad Stock Market Index and filtered for industry classification. The index holds 37 companies, ITA uses representative sampling and holds 48. Single-name cap is 22.5%, applied at quarterly rebalance. Index rebalanced quarterly (March, June, September, December).

The "cap-weighted" decision is the entire story for the space thesis. GE Aerospace is 19.04% of fund. RTX is 14.68%. Boeing is 10.00%. Howmet Aerospace is 5.18%. Those four alone are 49% of fund — and none of them is a meaningful space-economy player. GE Aerospace makes commercial aircraft engines (CFM/LEAP, GE9X); RTX has Pratt & Whitney engines plus Collins Avionics plus Raytheon missiles; Boeing makes 737s and 787s; Howmet makes aerospace fasteners and engine forgings.

The space exposure inside ITA shows up only at position 5 — Rocket Lab at 5.12% — and then trickles down in a handful of crossover names (Northrop Grumman has space systems, L3Harris has space systems, Lockheed has commercial space and ULA). But cap-weighted means the legacy primes dominate. ITA's space exposure on a revenue-weighted basis is probably 8-12% — meaningfully less than UFO (≥80% by design), ARKX (~50-60%), or NASA (~70-80%).

iShares (BlackRock) is the sponsor. NYSE Arca-listed. Launched May 2006 — by far the oldest ETF in this group. Massive AUM.

Index methodology / rebalance

Quarterly rebalance using the Dow Jones methodology — float-adjusted cap weighting with a 22.5% single-name cap to comply with RIC diversification rules under the Internal Revenue Code. GE Aerospace has tested the 22.5% cap before; if it exceeds at rebalance, weight is redistributed proportionally to other constituents.

Representative sampling means ITA does not hold all 37 index components — it holds 48 names that map the index's risk and return characteristics. Tracking error has historically been tight (under 10 bps annualized) but during sector dislocations (e.g., Boeing's MAX grounding 2019-2020) tracking error widened to 30-50 bps.

The methodology has one quirk relevant to the space thesis: "Aerospace & Defense" is interpreted broadly, so pure-play space companies (RKLB) are included once they meet the size and liquidity filters. RKLB entered the index in 2024 and has grown to 5.12% — which makes ITA an indirect way to access RKLB via an institutional wrapper.

AUM, expense ratio, daily volume

AUM is approximately $13.80 billion as of May 14, 2026 — vastly larger than UFO ($889M), ARKX ($930M), and NASA ($333M) combined. ITA is the institutional default vehicle for sector exposure and that AUM is structurally sticky.

Expense ratio is 0.40% (40 bps) — 35 bps cheaper than the three actively-or-space-pure-play alternatives. Over a 5-year hold the fee differential compounds to roughly 1.7-1.8% of total return. For a hedge position this matters less; for a core allocation it matters a lot.

Daily volume is 1.5-3 million shares — by far the most liquid in the group. Bid-ask spreads 1-3 bps, premium/discount inside ±5 bps in all but the most extreme tape.

Top 10 holdings + concentration

GE Aerospace 19.04%, RTX 14.68%, Boeing 10.00%, Howmet Aerospace 5.18%, Rocket Lab 5.12%, plus five more (typically Lockheed Martin ~5%, Northrop Grumman ~5%, TransDigm ~4%, Axon ~4%, L3Harris ~4%). Top 10 = 74.58% of fund. This is the highest concentration of any of the four ETFs in this section by a wide margin.

The reading: of the top 10, only RKLB is a pure-play space name. LMT, NOC, LHX have meaningful but minority space exposure (15-30% of their revenue). The rest are pure commercial aerospace or pure defense primes. So ITA's pure-space weight is realistically ~5-8% (RKLB + a fraction of LMT/NOC/LHX).

What's happening at largest holding (GE Aerospace)

GE Aerospace at 19.04% is the structural driver of ITA. GE is in the middle of a strong commercial-aircraft up-cycle (LEAP engine deliveries ramping, 9X for 777X starting volume production) plus a recovering defense engine franchise (F110 for F-15EX, T901 for the new Army helicopter). Revenue is growing high-single-digits, margins expanding. GE Aerospace reports Q2 2026 on July 22.

But GE Aerospace is not a space story. The link to the space theme is zero — GE Aerospace explicitly has no commercial space business. So ITA's largest position contributes nothing to the space thesis. It contributes to the defense thesis (modestly, through military aviation) and to the commercial aerospace cycle (heavily).

For an investor trying to express a space view, GE Aerospace at 19% is dead weight.

Alternative ETFs: UFO vs ARKX vs NASA vs ITA — when to use which

ITA's lane is defense and aerospace primes — period. It is NOT a space ETF and should not be substituted for UFO, ARKX, or NASA in any space-thematic allocation.

Use ITA when: you want diversified, low-cost, cap-weighted exposure to large-cap US aerospace and defense names (GE, RTX, BA, LMT, NOC, LHX). It's the right tool for a core 3-5% defense sleeve in a multi-theme portfolio.

Do not use ITA when: you want exposure to the new-space economy. The 5.12% RKLB position is washed out by the 49% in non-space primes. You'd pay $1 for $0.10 of space exposure.

Versus UFO: opposite trades. UFO is 80%+ pure space; ITA is ~5-10% space. They should be paired (UFO for theme, ITA for prime exposure), not substituted.

Versus ARKX: ITA is more concentrated in fewer pure-defense primes; ARKX has space + defense-tech tilt. ITA is cheaper (0.40% vs 0.75%), bigger, more liquid.

Versus NASA: completely different exposure. NASA gives you SpaceX; ITA gives you Boeing and RTX.

For our space deep-dive: ITA is the "anti-position" — useful to discuss because investors sometimes mistakenly use it as a space proxy and lose the thesis.

Structural risk: index methodology, liquidity, tracking error

Concentration risk is the major structural feature. Top 10 = 74.58% and top 4 = ~49%. Any single-name event at GE, RTX, BA, or HWM drags the fund disproportionately. Boeing's MAX grounding in 2019-2020 took ITA down materially relative to peers; another Boeing operational hit would do the same.

Sector-mix risk: ITA is structurally a bet on US defense + commercial aerospace as a combined sleeve. If the defense budget contracts (low probability in current environment but non-zero on a 5-year horizon) and the commercial aircraft cycle peaks (which historically takes 7-10 years from trough), both halves of ITA roll over together. ITA cannot rotate out.

Tracking error is structurally low (under 10 bps), but during quarterly rebalances the fund can drag the index by 5-15 bps over the rebalance window.

Methodology risk is low: Dow Jones is a mature, transparent index provider with predictable rules. Single-name cap at 22.5% provides at least a soft ceiling on GE concentration.

Bull / Gap / Optionality

Bull

1. Defense budget tailwind via top-10 prime concentration. GE, RTX, BA, LMT, NOC, LHX combined ~70% of fund. FY26 budget set, FY27 in mark-up, FY28 forecast continuing. Mechanical beta to defense budget continuation is the highest of the four ETFs here.

2. Lowest fee in the category at 0.40%. Over a multi-year hold the fee gap vs UFO/ARKX/NASA compounds to 1.5-2% of total return. For core allocators this matters.

3. Largest, most liquid vehicle. $13.8B AUM, 1.5-3M daily volume, 1-3 bp spreads. Can be sized in size without market impact.

4. Commercial aerospace cycle is mid-cycle, not late. Boeing + Howmet + RTX commercial exposure (~30-40% of fund) benefits from the multi-year aircraft delivery ramp. This is a real, separate cycle from defense — diversification within the fund.

Gap

1. Almost no space exposure. 5.12% RKLB plus fractional space weight inside LMT/NOC/LHX. If you are buying ITA expecting space-theme upside, you will be disappointed. ITA is the wrong vehicle.

2. Cap-weighted toward underperformers. RTX and LMT both show STRONG_EXIT signals on the scanner today (RSI 43, below 50MA). They sit at 14.7% and ~5% of fund respectively. Cap weight means ITA is mechanically dragged by names that are underperforming.

3. Boeing single-name risk. 10% in BA. Any operational, regulatory, or safety incident hits ITA 10%+. Boeing has a documented history of single-name dislocations.

4. Limited active rotation. Quarterly rebalance with fixed methodology means ITA cannot exit deteriorating names quickly. If a defense prime hits a sustained downcycle, ITA holds the position until the index methodology removes it — which can take quarters.

Optionality

The trade

ITA is the cheapest, most liquid US aerospace & defense ETF — but it is not a space ETF and should not be used as one. The right use case is a 2-3% core defense sleeve paired with a separate UFO/NASA position for space-theme exposure. Entry zone: $213.70-$236.20 (current ±5%). Sizing: 2.0% of risk capital as a defense-prime sleeve. Stop: $210.00 (just below 50MA $223.16 and recent support). Catalyst: GE Aerospace Q2 2026 earnings July 22, FY27 budget mark-up H2 2026. Pivot: if you want defense-prime exposure with a stronger space tilt, ARKX is more concentrated in LHX + KTOS + RKLB but costs 35 bps more and is less liquid; if you want pure space without the prime drag, UFO is the answer and they pair well together at roughly 2:1 ITA:UFO sizing.

Conviction: 4 / 10. Excellent vehicle for what it is; wrong vehicle for the space theme it is sometimes mistaken for.

Sources referenced inline throughout. Reference v1 of this template format: _Watchlist/hanmi-photoncap-style.md. ETF data current as of May 14-21, 2026 per ETF.com, iShares fact sheets, Tema ETFs disclosures, ARK Invest daily holdings reports, and ProcureAM. Prices locked from price-scan-2026-05-22.md.

End of Space & Aerospace Deep Dive v1. Generated 2026-05-22. Photoncap template locked. Coverage written to _Dashboards/coverage.json. Prices verified at scanner timestamp 19:45 UTC+4.