The FTSE 100 has performed well in 2026, so far. Year to date, the index is up about 8%. But that’s nothing compared to the performance of a defence-focused exchange-traded fund (ETF) I hold in my Self-Invested Personal Pension (SIPP).

For the year, this fund’s up about 25%, meaning that it has tripled the Footsie’s return on a share price basis.

A top defence ETF

The fund I want to highlight is the HANetf Future of Defence ETF (LSE: NATO), which seeks to track the EQM NATO+ Future of Defence Index.

Launched in 2023, it now has around $3.5bn assets under management. I’ve personally been invested in it since late 2024 and it has been a winning pick for me.

A unique product

What I like about this defence ETF is that it provides exposure to traditional defence companies like BAE Systems, Rheinmetall, RTX Corp (Raytheon), and Lockheed Martin as well as cybersecurity and AI companies such as Palo Alto Networks, CrowdStrike, and Palantir. As its name suggests, it’s all about the ‘future’ of defence.

To my mind, this gives it an edge over traditional defence ETFs that only focus on hardware manufacturers. Because it essentially has two separate return drivers.

Amazing long-term performance

The cybersecurity and AI focus has certainly paid off recently. As I said at the top, the fund is up about 25% year to date. It has also been a strong driver of long-term performance. Since its launch, the ETF has returned about 170%, which translates to a return of nearly 40% a year on average.

Turbocharged by cybersecurity stocks

Zooming in on the cybersecurity exposure, one major performance driver has been CrowdStrike, which is one of the world’s largest related companies today. Over the last three years, its share price has risen from around $40 to $220 as demand for its products has soared.

Another key performance driver has been Palo Alto Networks stock. Its share price has risen from around $110 to $390 over that timeframe as threats have become more prevalent and companies have taken action to defend themselves.

Gains from traditional defence stocks

Of course, the traditional defence companies have played their role too. Take BAE Systems, for example. Its share price is up about 120% over three years. This rise has come on the back of a significant ramp up in defence spending globally.

Worth a look today?

Is this ETF worth considering for a Stocks and Shares ISA or SIPP today? I think so. Looking ahead, I expect geopolitical tension to remain elevated. This, combined with increased NATO spending commitments, should result in robust levels of defence spending.

Meanwhile, I expect spending on cybersecurity to accelerate. With AI, cyber threats are only going to become more sophisticated.

Of course, the narrow focus of this product does add risk – it’s not as diversified as a broad market-focused index fund. However, as part of a diversified portfolio, I reckon it may add value, and boost long-term returns. Worth considering? Yes.

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Edward Sheldon owns shares in CrowdStrike, Palo Alto Networks, Palantir, and the HANetf Future of Defence ETF.