(Bloomberg) -- Exchange-traded funds focused on defense and arms companies are amassing inflows at a brisk clip as US President Donald Trump pushes for European countries to increase their military spending.

The Select Stoxx Europe Aerospace & Defense ETF (ticker EUAD) has taken in $280 million this year after barely any cash inflow between its October launch and the end of 2024, data compiled by Bloomberg show. The fund is up 40% this year, powered by massive gains in holdings — all European-listed — such as French electronics company Thales SA and German tanks-and-ammunition producer Rheinmetall AG.

In Europe, the Future of Defence UCITS ETF (NATO LN) — which tracks all manner of defense companies, including US-based ones — has added roughly $910 million amid a 19% run-up in the London-listed version of the fund, the data show. The inflows helped to more than double the fund’s assets since the start of the year. A US-listed ETF by the same ticker but different issuer has seen $6 million come in.

The US president’s pressure tactics have pushed European countries to work on increasing defense spending. Talks to grow outlays took on new urgency after American officials started working with Russia on forging a peace deal in Ukraine. US Defense Secretary Pete Hegseth said recently that NATO members in Europe should aim to spend 5% of their gross domestic product on defense.

“Most investors in defense are long term. They see that all countries, especially NATO countries, will have to up their spending for at least the next decade,” Hector McNeil, co-founder and co-CEO of HANetf, which helped launch the Europe-listed NATO fund, said of the recent inflows.

That fund “is particularly effective as it screens only to NATO-member and affiliate countries where everyone expects the largest ramp-up to be,” he added.

A new competitor entered the market this week too: WisdomTree Inc. launched the WisdomTree Europe Defence UCITS ETF (EUDF).

The European Union is looking for fiscal rules to be changed to allow for potentially trillions in defense spending to go toward upgrading its armies. Regional leaders have pledged to boost their military outlays and defense stocks have surged in recent weeks. Spain’s prime minister said country will reach NATO’s target of spending the equivalent of at least 2% of GDP on defense by 2029.

On Friday, German conservative leader Friedrich Merz reached an agreement with a key political party on a debt-funded spending package for defense and infrastructure.

Other defense-minded funds have also benefited. Global X’s Defense Tech ETF, which sports the ticker SHLD, has seen $230 million of inflows this year. It, too, tracks Rheinmetall, as well as American companies like General Dynamics Corp. and Lockheed Martin Corp.

But it’s not just the prospect of further defense spending that’s enticing some traders to these ETFs. Matt Tuttle, chief executive officer at Tuttle Capital Management, says EUAD — which he helped bring to market — represents a “Trump trade” for many investors.

“The only real Trump trade right now is European defense companies,” he said in an interview. “There is all sorts of uncertainty about what Trump’s going to do, but one thing we know he is going to do is try to get European countries to pay more for their own defense.”

--With assistance from Sujata Rao.

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