There’s An ETF For That? Drones

Defiance Drone & Modern Warfare ETF

JEDI

+6.79%

It’s a bit surprising Defiance ETFs didn’t get a cease and desist from Disney and Lucasfilm for the ticker, but credit where it’s due, JEDI is creative and definitely eye-catching.

The ETF passively tracks the BITA Drone & Modern Warfare Select Index, which casts a fairly wide net across next-generation defense technologies. According to Defiance, that includes not just drones, but also AI-driven defense IT, unmanned systems, electronic and communications warfare, space and satellite infrastructure, missile systems, cybersecurity, and robotics.

The index itself is relatively stringent. It only includes global public companies that generate at least 50% of their revenue from these areas. From there, holdings are free float market cap weighted, but with constraints. Individual positions are capped at 10%, and there’s a 45% cumulative cap on all holdings above a 5% weight. The index is rebalanced and reconstituted semi-annually, with provisions for adjustments in the event of extraordinary developments.

This is still a very new ETF, having launched in September 2025, but it has already grown to $85.3 million in assets under management. Performance has been solid out of the gate, with the fund up 8.89% year to date as of February 28, 2026, on a net asset value basis.

That said, trading costs are worth paying attention to. As of March 31, the 30-day median bid-ask spread sits at 0.35%, which is relatively wide. The expense ratio is also in line with most thematic ETFs at 0.69%, reflecting the niche exposure.

In terms of holdings, there is meaningful exposure to pure-play drone companies. Red Cat Holdings focuses on drone hardware and software solutions for military and commercial use, while AeroVironment specializes in unmanned aircraft systems used in defense applications, including loitering munition systems like the Switchblade.

At the same time, not every holding is a direct drone play. AST SpaceMobile is more focused on satellite-based cellular connectivity, and Archer Aviation is developing electric vertical takeoff and landing aircraft aimed at urban air mobility, essentially robo-taxis.

Compared to traditional defense ETFs, the portfolio tilts more heavily toward mid-cap names, including companies that are still scaling and not consistently profitable. As a result, JEDI comes across to me as a more speculative take on the defense theme, especially when stacked against more established, large-cap-heavy aerospace and defense funds.

Rex Drone ETF

DRNZ

+1.95%

DRNZ is the second non-leveraged, pure-play drone thematic ETF on the market. Like JEDI, it is a passive strategy that tracks an index, but the construction is a bit more nuanced.

The underlying benchmark, the VettaFi Drone Index, defines pure-play drone companies as those deriving at least 50% of their revenue, profits, or assets from drones or unmanned aerial vehicle technology. It also pulls from a broader universe of global diversified companies with at least 20% exposure to drones or enabling technologies, including defense firms with dedicated UAV divisions. Pure-play companies ultimately make up about 80% of the index weight.

The weighting framework is still based on free float market cap, but it applies a layered cap system that changes depending on how many pure-play names are in the index. Pure-play companies are generally capped at 15%, and there’s also a concentration control where any holdings above 5% are scaled down so that, in aggregate, they don’t exceed roughly 45% of the index. Any excess weight gets redistributed across the smaller positions.

Where it gets more mechanical is when the number of pure-play constituents drops. If there are 10 or more, the top three are capped at 15%, and the rest are equal-weighted. If there are nine, the top two can go up to 22.5%, with the remainder equal-weighted. If there are eight, the top two can reach 25%, again with the rest equal-weighted. Once you fall below eight names, the index effectively reverts to a capped market-cap approach, with each constituent limited to 15%. Diversified companies are limited to a maximum weight of 5% each.

DRNZ diverges a bit from JEDI in its thematic emphasis. There is less focus on military and space applications and more exposure to commercial use cases. That includes logistics, agriculture, surveying, and infrastructure inspection, areas where drones are increasingly being deployed at scale.

Still, there is some major overlap in holdings, such as AeroVironment, Ondas Holdings, Red Cat Holdings, and more. Volatus Aerospace, for example, is a Canadian company focused on drone services like aerial data collection and inspection. DroneShield Limited is another notable inclusion, specializing in counter-drone and electronic warfare solutions.

DRNZ launched shortly after JEDI in October 2025 and has grown to a similar size, with approximately $84.9 million in assets under management. It is also slightly cheaper, with a 0.65% expense ratio.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.