ProcureAM co-founder and CEO Andrew Chanin joins Wealth! for Yahoo Finance Space Week to offer tips for investing in the space industry.

Chanin explains that because it may be difficult for investors to grasp all companies with exposure to the space industry, a space equity traded fund (ETF) that consolidates such companies can be a useful tool. However, the ProcureAM founder says the management of an ETF is "extremely important," and investors should watch for an "actionable" plan from fund managers.

Chanin adds that the companies included in Procure's recent space ETF (UFO) are ones that "[enable] space technologies to make something that is maybe helping consumers. But then you also have other companies that are involved in areas like rocket launch, such as Rocket Lab (RKLB) ... where these types of companies are helping not just bring things to space, but hopefully helping to lower the cost and access to utilizing space as well."

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Catch up on Yahoo Finance's special coverage as part of this week's Space Race: Investing in the Final Frontier series.

This post was written by Nicholas Jacobino

Video Transcript

Well, investors have more space ETF S to choose from than ever before, but which ones might be worth the exploration.

One stand out has been procure A MS, Procure A S A UFO and ETF focused on space exploration that launched back in 2019 and for more on how to play the space sector, we've got Andrew Chan and who is the co founder and CEO of Procure AM as part of Yahoo finances space.

We great to have you here with us today.

Andrew first and foremost, just walk us into UFO.

The components that you're utilizing to really make sure that this is a well rounded approach towards uh a thematic ETF of space.

So when we decided that we wanted to launch UFO to be the world's first pure play global Space ETF one of the really important factors to us was picking an index that we believe represented the space industry and who had its rules and methodology um aligned with finding these pure play companies.

So the index was actually co developed by a former director of research from the Space Foundation uh Michael Walter Range where he had actually helped them build and develop the, the calculations that the Space Foundation uses to determine uh the the annual size growth um and types of companies and technologies that encompass the overall space economy.

So, um you know, having a team of individuals that are very familiar with both indexing and ETF S as well as the space industry itself was a way that we believe truly differentiated this approach to truly find companies that are deriving.

Uh for this fund, over 80% of the fund is focused on companies driving a majority of the revenues from space.

So as the previous segment mentioned, you know, companies that are in the launch business, the satellite business, communications, as well as many other different types of areas like defense that are becoming extremely important for the overall space industry today.

I mean, some of these companies are space plays, some of them are reliant on space.

I guess what is the best evaluation that investors should really deploy when trying to figure out the exposure that a company has to space in order to make their investment decision.

So this index team actually does a significant amount of research to determine where revenues are coming from these various companies.

So um you know, some of those names that you had just pulled up, some of those companies are those that are reliant upon space, meaning that if you took space out of the equation, such as a gps focused company like Garmin, their products simply don't work.

So these are companies that are enabling space technologies to make something that is maybe helping consumers.

But then you also have other companies that are involved in areas like rocket launch, such rocket lab mentioned on the previous segment where you know, these types of companies are are helping, not just uh bring things to space, but hope hopefully helping to lower the cost and access to utilizing space as well.

So there's many different types of space companies.

I think over the recent years, we've seen many uh you know, spec companies come out and some of them weren't necessarily ready for, you know, the public markets and didn't necessarily bring out their companies at the best time or with the best kind of um uh you know, financing behind it to really drive it into the next stage of those companies growth.

But as some of these companies are settling down and, and really focusing on the management and direction of the companies and trying to lock down contracts, they're um you're kind of in this new stage of their own development.

So it's really important to understand, you know, the various types of companies that are out there, but it is difficult, which is why an ETF can be interesting being that something like UFO provides access to over 30 publicly traded companies from around the globe.

But management is extremely important and understanding that they have a plan that is actionable and in some cases, you know, some companies are completely reliant upon government contracts um from or from space agencies such as NASA or the ES A over in Europe.

Um, some companies are more diversified and they have commercial clients as well as government contracts solely focused on consumer commercial contracts.

So those that have diversification might be able to weather various storms differently.

And Andrew just lastly, we only have about 30 seconds here.

How do you kind of safeguard against volatility, volatility in the form of not getting one of those major contracts from a government or volatility uh in the event that a, a launch goes badly or has to get rescheduled things of that instance.

Yes.

So all of those factors can be really important for space companies in their viability, which is why we think that investors may be interested in using something like an ETF that does provide that diversification from a company basis.

Um Whereas different companies might have insurance policies or other thing that might protect against specific risks of individual launches.

Um Every company is in its own current stage of its own growth cycle.

Um And it's, it's, it's difficult.

So certainly other types of hedging opportunities like using options or things like that might be a way to hedge against that for, you know, investing in, in the broader space industry.

UFO provides, you know, a way that might be interesting for certain investors to get access to many companies doing various different things across the industry.

Andrew Chan and who is the co founder and CEO of Procure and thanks so much for taking the time here with us.

Appreciate it.

Thank you.