Is the Global Space Economy the Next Big Investment Theme for Clients?

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Today, the global space economy is estimated to be worth $384 billion. By 2040, Morgan Stanley estimates that value will nearly triple, reaching $1.1 trillion. Bank of America Merrill Lynch is even more aggressive in its projections, suggesting the space economy could represent as much as $2.7 trillion by 2045.

This presents a huge opportunity to capitalize on the future expected growth of a sector that—up until recently—has been largely off limits to the average investor. Baby boomers, millennials and Generation X have all been captivated by the “final frontier,” and may soon want to explore these investments further.

Advisers may not be able to ignore such opportunities if investor demand grows. It is crucial to understand the value of investing in space and where clients can turn to gain access to this emerging sector.

Here are three key reasons why now may be the time to invest in space:

1.) Trade wars fueling government investment

Recent news from Washington, D.C., paints a promising picture about the future of the Space Force, a proposed sixth branch of the U.S. military that would organize, train and equip military space personnel. Although the details of the Space Force are still being negotiated, President Donald Trump and key members of the House and Senate all recognize the importance of American defense capabilities in space. By creating a Space Force that operates independently of the Air Force, greater emphasis could be placed on space-related career paths and space acquisition programs. From an investment perspective, this could lead to more robust defense spending on space-related hardware, software and services, especially at a time when trade wars are shining a spotlight on protecting national interests and security.

Governments are also looking to buy services from private companies rather than specifying or building their own systems. In one recent example, NASA awarded contracts to commercial companies that will transport NASA science instruments to the lunar surface. This approach is intended to stimulate creative commercial solutions to government challenges, essentially creating a new kind of “space race” that could result in powerful new capabilities that create value for non-government customers as well.

2.) Commercial revenue growth

The majority of future growth in the global space economy will likely take place in the private sector, as was the case over the past decade. Today, private industry already accounts for 80 percent of the space market. While governments continue to sponsor space-related initiatives for science, exploration and defense, private industry leads the way in addressing the needs of businesses and consumers.

Traditionally, private companies have encountered barriers to entering the space market due to high costs associated with the sector. However, many types of satellites can now be manufactured inexpensively due to advances in electronics. On a different front, the introduction of reusable rockets has contributed to a drop in launch prices, increasing the accessibility of space. In addition to these innovations, global space policy has become more defined, offering commercial entities greater legal and regulatory clarity about how they can operate in space. This significantly reduces the risk of investing in space, another catalyst for commercial investment.

Commercial opportunities to invest in space will continue to expand as products are developed for interplanetary exploration. While the idea of lunar colonies and asteroid mining may seem far-fetched today, robotics, artificial intelligence (AI) and reusable spacecraft are rapidly changing our approach to the formerly insurmountable challenges of space.

3.) Disruptive technologies reliant on space-based systems

Space-related systems have become the toll operators for the data superhighway. Satellite-enabled navigation (such as GPS) is the driving force behind the ridesharing apps and location-based delivery services that have opened entirely new markets on Earth. Satellite-based technology also fundamentally influences disruptive investment themes like 5G, the Internet of Things (IoT), machine learning and cloud computing.

The pioneers who invest in these transformative technologies believe the amount of data created and utilized for these applications may expand exponentially. Companies developing the infrastructure necessary for the transfer of all this data will be instrumental to successful operation, and as such, are well-positioned to benefit from the expected growth of each of these industries.

Other industries have had profitable “toll operators” as well. Rail providers, for example, have been critically important to the movement of physical goods for more than 100 years. Today, the world is driven by digital assets and goods, and space-related systems make their transportation and communication possible.

The growth of the global space economy over the next 20 to 25 years will incorporate many industries including technology, manufacturing, biotech and mining, as well as areas we have not yet envisioned. The opportunity for investors is far-reaching and evocative of any major industry at its inception state, such as when Ford debuted the Model T or when initial iterations of the internet appeared.

Introducing your clients to satellite-manufacturing companies and other space-related technologies could offer a way to capitalize on the opportunities in this sector today and for years to come. The “space revolution” is upon us, and your clients cannot afford to ignore it.

Editor’s note: Want to see more about the trends in investing clients are asking about and your fellow planners are exploring? Check out the FPA/Journal of Financial Planning Trends in Investing Survey findings

Andrew Chanin is the co-founder and CEO of ProcureAM, a wholly owned subsidiary of Procure Holdings, LLC. ProcureAM is a new exchange-traded product (ETP) issuer behind The Procure Space ETF (NYSE Arca: UFO), the world’s first global ETF to give investors pure-play access to the expanding space industry.  

 

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