ITA Undercuts MISL on Cost as Defense ETFs Diverge on Tech
Investors weighing exposure to aerospace and defense budgets must choose between the lower-cost, industrials-heavy iShares ITA and the tech-inclusive, pricier First Trust MISL.
Two leading exchange-traded funds tracking the US aerospace and defense sector are offering investors distinctly different routes to capitalize on national security spending. The iShares U.S. Aerospace & Defense ETF (ITA) and the First Trust Indxx Aerospace & Defense ETF (MISL) both hold 49 securities, but their portfolio construction, fee structures, and market maturity diverge significantly.
Cost is the most immediate differentiator for market professionals evaluating these vehicles. ITA charges an expense ratio of 0.38%, notably cheaper than the 0.60% fee levied by MISL. This lower cost base contributes to ITA delivering a trailing-12-month yield of 0.50%, which translates to a distribution of $1.06 per share at its recent $230.89 price. MISL yields 0.30%, paying $0.14 per share on a recent price of roughly $42.72.
The funds' launch dates highlight a gap in operational scale. ITA has been trading since 2006, giving it a longer track record to calculate metrics like beta, which measures price volatility relative to the S&P 500 using up to five years of monthly returns. MISL, launched in 2022, lacks that extensive historical baseline but brings a modernized index methodology to the market.
Sector Allocation and Concentration Risk
The strategic divergence becomes apparent in portfolio allocation. ITA is a pure industrials play, allocating entirely to that sector. Its top weights are heavily concentrated in traditional aerospace and defense contractors. GE Aerospace dominates the fund with a 22.37% weighting, followed by RTX at 15.69% and Boeing at 9.20%.
MISL spreads its risk more evenly among its top holdings while introducing a distinct technology component. The fund allocates 80% of its assets to industrials and 13% to technology. Its largest position is GE Aerospace, but at a much lower 8.85% weight. Crucially, MISL pairs a 7.77% allocation to Boeing with an 8.28% stake in Palantir Technologies, a defense-related technology firm that ITA entirely excludes.
For investors, the choice dictates a highly specific risk profile. ITA’s heavy concentration in legacy industrial giants amplifies its sensitivity to commercial aviation cycles and traditional procurement budgets. MISL’s inclusion of defense-adjacent technology firms provides an alternative growth tilt, though buyers pay a premium in annual fees for that structural diversification.
