Best Defence ETFs for Singapore Investors (2026 Guide)

NATO rearmament is reshaping global markets — here’s how Singapore investors can gain tax-efficient exposure via UCITS ETFs on the London Stock Exchange.

For Singapore investors, the best defence ETFs in 2026 are Ireland-domiciled UCITS funds listed on the London Stock Exchange — specifically VanEck Defense UCITS ETF (DFNS), HANetf Future of Defence UCITS ETF (NATO), and iShares Global Aerospace & Defence UCITS ETF (DFND). These ETFs avoid US estate tax and benefit from Ireland’s 15% withholding tax treaty rate, saving Singapore investors up to SGD 300 per year per SGD 100,000 invested compared with US-listed equivalents.

Not financial advice. All figures are for educational reference only. Data as at April 2026 unless noted.

Table of Contents

Why Defence ETFs Are Trending in 2026

Global defence spending hit USD 2.63 trillion in 2025 — a record high — and shows no signs of slowing. For the first time in NATO’s history, all member nations met or exceeded the 2% of GDP defence spending benchmark in 2025. European allies collectively increased their budgets by 20% year-on-year, driven by the ongoing conflict in Ukraine, a more assertive NATO posture, and pressure from Washington to shoulder more of the alliance’s costs.

This structural shift in government spending is being reflected in financial markets. Defence stocks have been among the top-performing sectors globally in 2025 and early 2026. The VanEck Defense UCITS ETF (DFNS) returned 40.37% over the past twelve months. The iShares Global Aerospace & Defence UCITS ETF (DFND) gained 29.84% over the same period, according to fund factsheet data as at April 2026.

For Singapore investors, the macro environment is particularly compelling. Singapore sits in one of the most strategically contested regions in the world. The Indo-Pacific security environment — including tensions in the South China Sea and Taiwan Strait — means that defence investment is not merely a Western theme but increasingly a global one. HANetf’s QUAD ETF, launched in 2025, provides targeted exposure to Indo-Pacific defence companies for investors who want regional focus.

Beyond geopolitics, the technological dimension matters. Modern defence spending increasingly overlaps with AI, cyber security, space systems, and drone technology — sectors that attract significant research and development investment regardless of political cycles. This gives defence ETFs a growth component that older, pure aerospace-and-manufacturing funds lacked.

Why Singapore Investors Should Use LSE-Listed UCITS ETFs

When choosing a defence ETF, the exchange and domicile of the fund matter as much as the fund itself. Singapore investors face two structural tax disadvantages when buying US-domiciled ETFs directly:

1. US Estate Tax: Non-US investors face a 40% US estate tax on US-situs assets — including US-listed ETFs — above USD 60,000 at the time of death. For a Singapore investor holding USD 200,000 in a US defence ETF such as XAR, the estate tax exposure could be over USD 56,000 on the amount above the threshold. Ireland-domiciled UCITS ETFs listed on the LSE have no US-situs status, so this risk is eliminated entirely. For a detailed explanation, see our Singapore T-bills 2026 article for broader context on risk management in a SG portfolio.

2. Withholding Tax (WHT): US companies pay dividends, and the US IRS withholds tax before those dividends reach the ETF. For US-domiciled ETFs, the WHT rate is 30% on US source dividends. Ireland-domiciled ETFs benefit from the Ireland-US tax treaty, which reduces this to 15%. On a 2% dividend yield, that’s a 0.30% annual net return advantage for the Ireland-domiciled fund — equivalent to wiping out the TER difference between most UCITS and US ETFs.

3. No Singapore Capital Gains Tax: Singapore has no capital gains tax. There is also no dividend tax at the investor level for accumulating ETFs, as the dividends are reinvested within the fund before they reach you. This makes accumulating UCITS ETFs on the LSE an extremely tax-efficient structure for Singapore-based retail investors.

Source: IRS Publication 515, Ireland-US Tax Treaty, MAS guidelines, April 2026

Best Defence ETFs for Singapore Investors

The three core UCITS defence ETFs available on the London Stock Exchange that Singapore investors should consider are DFNS, NATO, and DFND. Each has a different index focus, TER, and AUM profile. Here is how they compare:

Source: JustETF, fund factsheets, VanEck, HANetf, iShares, April 2026

VanEck Defense UCITS ETF (DFNS) — Best for Global Breadth

DFNS is the largest pure-play defence ETF in Europe by AUM, at approximately USD 7.8 billion as at April 2026, according to VanEck fund data. It tracks the MarketVector Global Defense Industry Index, which covers companies worldwide engaged in military and defence operations, with 43 holdings across the US, Europe, Asia, and South Korea. Top holdings include RTX Corporation (7.71%), Thales (7.65%), Leonardo (7.09%), Hanwha Aerospace (6.71%), and Saab (6.27%). The TER is 0.55% p.a. — the highest among the three core options, but offset by its broader geographical diversification including significant exposure to European and Asian defence names.

For a Singapore investor holding SGD 50,000 in DFNS, the annual management fee cost is approximately SGD 275 — equivalent to about 0.55% of the portfolio value. The 1-year return of 40.37% as at April 2026 reflects the surge in global defence spending commitments.

HANetf Future of Defence UCITS ETF (NATO) — Best for Pure NATO Alignment

The HANetf NATO ETF tracks the EQM NATO+ Future of Defence Index, which specifically selects companies from NATO member states and a small group of NATO-aligned nations. Launched in July 2023, it has grown rapidly to USD 3.2 billion in AUM, making it one of the fastest-growing thematic ETFs in Europe. The TER is 0.49% p.a., and the fund holds 59 securities. Unlike DFNS, the NATO ETF excludes companies from non-NATO-aligned nations such as South Korea and Israel, which matters for investors who want politically targeted exposure. The 1-year return stands at 25.25% as at April 2026.

iShares Global Aerospace & Defence UCITS ETF (DFND) — Best for Cost-Efficiency

DFND is the newest of the three, having launched in February 2024, but has grown quickly to approximately USD 1.8 billion AUM. It is managed by BlackRock — the world’s largest asset manager — and tracks the S&P Developed BMI Select Aerospace & Defense 35/20 Capped Index. At 0.35% TER, it is the cheapest option among LSE-listed defence UCITS ETFs, and carries BlackRock’s operational reputation. The fund returned 29.84% over the past twelve months, and its 1-year performance of 39.40% on the LSE (in USD terms) reflects the strength of the aerospace and defence sector. For cost-sensitive long-term investors, DFND’s lower TER means approximately SGD 100 less in annual fees per SGD 100,000 invested versus DFNS.

Detailed Comparison: DFNS vs NATO vs DFND

Choosing between the three main UCITS defence ETFs depends on your priorities: cost, breadth, or political alignment. Here is a side-by-side feature breakdown:

Source: JustETF, VanEck, HANetf, BlackRock iShares factsheets, April 2026. Past performance does not guarantee future results.

Which Should Singapore Investors Choose?

Choose DFNS (VanEck) if you want the broadest global exposure, the largest AUM for liquidity, and can tolerate the slightly higher 0.55% TER. Its inclusion of South Korean (Hanwha Aerospace) and Israeli defence companies adds diversification beyond the NATO alliance.

Choose NATO (HANetf) if you specifically want exposure tied to NATO alliance members and want the most direct thematic alignment to the NATO rearmament story. The 59-holding portfolio is more diversified than DFNS and the 0.49% TER is reasonable for the thematic focus.

Choose DFND (iShares/BlackRock) if cost efficiency is your primary concern. At 0.35% TER, it is the cheapest UCITS defence ETF on the LSE and is backed by the world’s largest asset manager. It is the best choice for investors who want broad developed-market aerospace and defence exposure at minimum cost. A Singapore investor holding SGD 100,000 in DFND saves approximately SGD 200 per year versus DFNS on fees alone.

All three are suitable for long-term investors seeking passive income Singapore-style through capital growth in the defence sector. They can also complement a broader portfolio alongside dividend-paying S-REITs for balanced passive income exposure — see our guide to passive income Singapore strategies.

How to Buy Defence ETFs in Singapore (Step-by-Step)

All three ETFs — DFNS, NATO, and DFND — are listed on the London Stock Exchange and traded in USD. Singapore investors can buy them through the following brokers:

Interactive Brokers (IBKR) — Recommended for Cost-Efficiency

IBKR is the most cost-effective broker for buying LSE-listed ETFs. The commission for LSE trades is typically USD 1.70 per trade (tiered pricing), and the FX conversion spread from SGD to USD/GBP is approximately 0.0020 (0.2%). For larger portfolios above SGD 30,000, IBKR’s all-in costs are the lowest available to Singapore investors. Steps: open an IBKR account → fund with SGD → convert to USD → search for DFNS/NATO/DFND → select LSE as exchange → place a market or limit order.

Saxo Markets — Good for Multi-Asset Investors

Saxo offers access to the LSE with a minimum account funding of SGD 3,000. The commission structure is 0.10% per trade with a minimum of USD 10. FX spread is approximately 0.25%. Saxo’s platform is well-suited for investors who also hold SGX stocks, bonds, and CFDs alongside their ETF portfolio.

Syfe Brokerage — Best for Beginners

Syfe’s brokerage platform allows Singapore investors to buy LSE-listed ETFs with no minimum investment. Commission is 0.06% for the Growth tier (accounts above SGD 20,000). For new investors just starting out, use the Syfe referral code to get a fee waiver on your first three months of trades. Syfe also offers fractional shares, making it easier to invest smaller amounts.

FSMOne (Fundsupermart) — Good for Regular Savings Plans

FSMOne offers a Regular Savings Plan (RSP) for ETFs, allowing Singapore investors to invest a fixed SGD amount monthly. This is ideal for dollar-cost averaging into defence ETFs over time. Commission is 0.08% with a minimum of SGD 10 per trade. Use the FSMOne referral code for a cashback bonus on sign-up.

CPF/SRS compatibility: LSE-listed ETFs such as DFNS, NATO, and DFND are not eligible for CPF Investment Scheme (CPFIS) investment. However, they may be purchased using Supplementary Retirement Scheme (SRS) funds through eligible brokers (IBKR, Saxo, FSMOne). This allows SRS account holders to invest in global defence ETFs while deferring SRS-contributed income tax. For a complete framework, see our CPF investment strategy Singapore guide, and use our Singapore retirement calculator to model how defence ETF allocation fits into your retirement plan.

Risks to Consider

Defence ETFs carry specific risks that Singapore investors should understand before investing:

Geopolitical Cyclicality: Defence spending is highly sensitive to political cycles. A ceasefire in Ukraine, a change in US foreign policy, or a broad de-escalation in global tensions could reduce government defence budgets and weigh on defence stocks. The sector that has outperformed strongly in 2025–2026 could face headwinds if the geopolitical environment changes.

Concentration Risk: Despite holding 43–59 securities, these ETFs are sector-concentrated — all holdings are in defence or aerospace. A regulatory change (e.g. arms export restrictions), a major contract loss, or a widespread ESG-driven divestment from defence could affect multiple holdings simultaneously. This is unlike a broad market ETF such as VWRA or CSPX, which has diversification across all sectors. For comparison, our Singapore REIT ETF guide covers diversified income-focused options.

Currency Risk: DFNS, NATO, and DFND are priced in USD on the LSE. Singapore investors buying in SGD face USD/SGD currency risk on top of the underlying equity risk. A strengthening SGD against USD will reduce returns when converted back.

ESG and Ethical Considerations: Defence investing remains excluded from ESG-focused portfolios. Many SG robo-advisors and banks screen out weapons manufacturers. Investors should consider whether defence ETF exposure is consistent with their personal values and any ESG mandates in their existing portfolio.

High Valuations After Strong Run: Defence stocks have already re-rated significantly. The sector’s strong 1-year returns mean that some of the “easy money” from the NATO rearmament theme may already be priced in. Dollar-cost averaging (DCA) into the position over 6–12 months, rather than a lump-sum entry, can reduce timing risk.

This article is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future returns. Always assess your own risk tolerance and consult a licensed financial adviser if needed.

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