Defense Diversified: Why American Portfolios Need a Global Battle Plan
When it comes to defense investing, many U.S. portfolios march in lockstep - loaded with the same handful of mega-cap contractors, all headquartered on familiar soil.
While these companies are formidable, the global defense landscape is shifting fast. Geopolitical tensions are rising, alliances are evolving, and military procurement is becoming an international business. For advisors, the message is clear: the battle for portfolio resilience isn’t just fought at home.
A Global Build-Up in Defense Spending
World military spending hit a record $2.72 trillion in 2024, up 9.4% from the previous year - the steepest increase since the Cold War era. [1] Europe led the surge, with military spending up 17%, driven by the Ukraine war and rising NATO efforts. [2] In East Asia, overall military expenditure climbed 6.3% -reaching $629 billion - with East Asia alone up 7.8% to $433 billion. [3] Nations such as Japan and South Korea continue direct increases: South Korea spent ~$47.6 billion (2.6% of GDP) in 2024. [3]
These aren’t marginal increases - they’re strategic investments in advanced systems, new technologies, and expanded production capacity.
South Korea is stepping into the spotlight. As one of the world’s top 10 defense exporters, Korea is selling tanks, aircraft, and missile systems to NATO countries and beyond. This isn’t a niche player; it’s a key supplier in the global defense supply chain, winning multi-billion-dollar contracts across multiple continents. [4]
The Limits of a U.S.-Only Defense Play
Most U.S. defense ETFs are highly concentrated, often with over half their assets in just a few mega-cap names. While these firms have strong track records, this concentration can limit exposure to the innovations and growth coming from overseas players.
The result? Advisors seeking to diversify their defense allocation may be missing entire regions of potential opportunity - regions where defense contractors are gaining market share, not defending it.
KDEF: Adding a Potential Strategic Ally to the Portfolio
The Plus Korea Defense Industry Index ETF (KDEF) seeks to offer targeted exposure to Korea’s defense sector - one that is export-focused, technologically advanced, and geographically positioned at a critical intersection between East Asia’s powerhouses.
Korea’s defense companies are not only manufacturing for domestic use; they’re producing for global demand. From European tank contracts to Middle Eastern missile defense deals, Korean firms are becoming indispensable to the supply chains that keep allied militaries equipped and ready. [4]
Technological innovation is also part of the equation. Korean defense manufacturers are integrating AI, robotics, and cybersecurity solutions into their platforms - capabilities that align with the future of modern warfare. This forward-looking approach may position them to compete head-to-head with global giants.
The Case for a Global Defense Allocation
With geopolitical shifts moving quickly, global defense diversification may help:
- Reduce reliance on U.S. mega-cap defense names
- Capture potential opportunities in regions with expanding defense budgets
- Access innovative, export-focused companies serving allied markets
Fortifying for the Future
Defense is no longer a purely domestic sector. Tomorrow’s defense leaders will come from a broader, more interconnected marketplace. By looking beyond U.S. borders and including players like South Korea, advisors may help clients prepare for an evolving global security environment.
Don’t fight tomorrow’s battles with yesterday’s portfolio. Consider how KDEF may diversify your clients’ global equity allocation today.
Click here to see KDEF’s Holdings.
[1] Reuters, World military spending hits $2.7 trillion in record 2024 surge, Reuters.com, 4/27/25.
[2] International Peace Bureau, The world spent 2.7 trillion $ in the military in 2024, according to new data published today by SIPRI, ipb.org
[3] Liang, Xiao et al, SIPRI Fact Sheet, Trends In World Military Expenditure 2024, April 2025
[4] The Defense.Info Team, South Korea’s Defense Export Boom, Defense.Info, 6/22/25.
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