Designed to provide broad exposure to the Industrials - Aerospace & Defense segment of the equity market, the State Street SPDR S&P Aerospace & Defense ETF (XAR) is a passively managed exchange traded fund launched on September 28, 2011.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Industrials - Aerospace & Defense is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.
Index Details
The fund is sponsored by State Street Investment Management. It has amassed assets over $5.99 billion, making it one of the larger ETFs attempting to match the performance of the Industrials - Aerospace & Defense segment of the equity market. XAR seeks to match the performance of the S&P Aerospace & Defense Select Industry Index before fees and expenses.
The S&P Aerospace & Defense Select Industry Index represents the aerospace & defense sub-industry portion of the S&P Total Stock Market Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Global Select Market. The Aerospace & Defense Index is a modified equal weight index.
Costs
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.33%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Industrials sector -- about 100% of the portfolio.
Looking at individual holdings, Karman Holdings Inc (KRMN) accounts for about 4.52% of total assets, followed by Ati Inc (ATI) and Lockheed Martin Corp (LMT).The top 10 holdings account for about 39.2% of total assets under management.
Performance and Risk
So far this year, XAR has added about 9.45%, and is up roughly 65.62% in the last one year (as of 04/23/2026). During this past 52-week period, the fund has traded between $167.91 and $292.74.
The ETF has a beta of 1.03 and standard deviation of 22.14% for the trailing three-year period, making it a medium risk choice in the space. With about 42 holdings, it has more concentrated exposure than peers.
Alternatives
State Street SPDR S&P Aerospace & Defense ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XAR is an outstanding option for investors seeking exposure to the Industrials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Global X Defense Tech ETF (SHLD) tracks GLOBAL X DEFENSE TECH INDEX and the iShares U.S. Aerospace & Defense ETF (ITA) tracks Dow Jones U.S. Select Aerospace & Defense Index. Global X Defense Tech ETF has $8.29 billion in assets, iShares U.S. Aerospace & Defense ETF has $13.40 billion. SHLD has an expense ratio of 0.5%, and ITA charges 0.38%.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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State Street SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).