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Hard Value Fund

Hard Value Fund - A Defense Fund or Defense ETF?

Updated: Jun 19, 2023

Global defense spending has been rising steadily for decades. The most recent increase was particularly sharp in 2022. This is shown by a recent analysis by SIPRI. The background to the recent sharp rise in arms purchases was clearly the war in Ukraine.

With increasing sales and profits in the armaments industry (weapons/defense industry), the question also arises for investors as to which fund they can best use to participate in the further development of this sector. One possibility is the Hard Value Fund R dist. (WKN: A3D1ZP), whose current exposure to aerospace & defense companies is approximately 23.4% (as of 31/05/2023).

This is a marketing communication for German investors. Please read the fund's prospectus and basic information sheet (KID) before making a final investment decision.

In this article, you will learn more about the background to the new international arms record, why Aerospace & Defense is currently a key component of the Hard Value Fund's hard value strategy, and whether the fund is a German defense fund or a defense (weapons) ETF in the legal sense.

German Armed Forces Defence Fund Hard Value Fund van Grunsteyn
Soldiers of the German Armed Forces, © Mircea Moira

Sharp Rise in Global Defense Investments in 2022

The Stockholm International Peace Research Institute (SIPRI) regularly publishes data on current developments in the arms sector. Its annual report on global arms spending (last update: April 2023) attracts particular public attention.

According to this report, spending on military purposes, including weapons, reached an all-time high in 2022, totaling more than $2.2 trillion. USD. Over half of this amount can be attributed to just three nations: USA, China and Russia.

defense spendings worldwide 2000-2022
Quelle: SIPRI

In a year-on-year comparison, Russia increased its defense investment the most with +33%, followed by the USA with +9% and China with +2%. In percentage terms, China showed the lowest growth among these three world powers, but its defense spending, unlike that of the USA and Russia, has increased every year without exception over the past 22 years.

In addition, many other nations also increased their defense spending. The current strong increase in investment is primarily due to the war in Ukraine. In absolute terms, the USA is by far the main supporter of the Ukrainian government.

It is also striking that some states with geographical proximity to Russia increased their military spending particularly significantly in 2022. In particular, Finland (+36%), Lithuania (+27%), Sweden (+12%) and Poland (+11%) should be mentioned.

Away from China, investment in the defense sector also increased significantly in other parts of Asia. India ranked 4th in absolute terms in 2022, with Japan arming itself due to potential conflict with China, North Korea and Russia. Japan's defense spending as a percentage of GDP reached its highest level since the 1960s.

Hard Value Fund's Armaments Assets

As of 31/05/2023, the asset management of the Hard Value Fund has allocated an actively managed aerospace & defense share of around 23.4%. According to the implemented hard value strategy, various defense companies are included in the asset selection, as according to the analyses of the asset management they currently offer substance strength and stability as well as the best return opportunities from a risk perspective.

The geopolitical situation has changed significantly at the latest with Russia's active entry into the Ukraine conflict. The European continent is once again facing the threat of an expanding war and has greatly increased arms spending. Obsolete war equipment is being replaced and huge investments in digitization of the armed forces are being driven forward.

For example, Sweden has also recognized the relevance of armaments for itself. The Swedish government is consistently implementing armaments projects and managing huge cash flows. In 2022, defense spending increased by around 12% compared with the previous year.

One beneficiary is Saab AB, a Swedish company specializing in the development of defense and security systems. Recently, the company announced a new maintenance contract from the Swedish government worth SEK 308 million. Saab AB is an important position in the Hard Value Fund.

In general, maintenance orders are a profitable business for the weapons industry. This is because they secure a stable earnings base for the companies for several years.

The solid business model of many defense companies is in many cases also accompanied by solid dividends. Various defense companies have already announced an increase in their dividend payments.

Rheinmetall recently announced its intention to raise its dividend payment for 2022 to €1.10 (previous year: €0.80). According to CEO Armin Papperger, the international conflict situation is causing many countries to spend more on their armed forces again. Rheinmetall is also an important position in the Hard Value Fund.

German Legal Requirements for the Use of "Defense Fund" and "Defense ETF"

From a legal perspective, the German Federal Financial Supervisory Authority (BaFin) has set out naming requirements for domestic investment funds in its fund category guideline. The guideline applies to all German public investment funds pursuant to sections 162 to 272 of the German Investment Code (Kapitalanlagegesetzbuch, KAGB). This includes so-called undertakings for collective investment in transferable securities (UCITS) and alternative investment funds (AIF).

The use of the designation of a fund category - such as equity fund, real estate fund or armament fund - requires that, according to the investment conditions of the fund, more than 50% of the value must be continuously invested in the respective fund category. This means, for example, that an equity fund must consist of more than 50% equities and an armaments fund of more than 50% armaments.

For the designation as an ETF, BaFin requires, among other things, very close supervision of the trading of the units by a market maker and various specific disclosures in the sales prospectus, basic information sheet and sales documents on the transparency of the portfolio and the calculation of the indicative net asset value.

The Hard Value Fund - R dist. (ISIN: DE000A3D1ZP1) is an actively managed equity fund with a permanent equity quota of at least 51%, tradable on several stock exchanges. However, it is not an armaments fund (Waffenfonds) or armaments ETF (Waffen-ETF).

The active asset management aims at substance strength and stability as well as best return opportunities under risk aspects. It can therefore reduce the armaments component at its own discretion if armaments stocks no longer meet the hard value criteria.


In the past, many defense companies have demonstrated strength of substance and stable earnings. The current international conflict situation is also prompting many countries to invest enormous amounts of money in their military.

Numerous defense companies are benefiting from this situation - some more and some less. As part of its Hard Value strategy, the asset management of the Hard Value Fund. has identified various companies and allocated a relatively high proportion to this industry: approximately 22.4% as of 04/24/2023.

However, the fund does not qualify as a defense fund or defense ETF in the legal sense. The asset management is free to reduce the armaments allocation at its own discretion, should individual stocks no longer meet the implemented hard value criteria in the future.

Click here for our sector analysis Armaments: Upheaval through digitalization (german language only).

Legal Notices

This is a marketing communication for German investors. Please read the fund's sales prospectus and basic information sheet (KID) before making a final investment decision. This also contains detailed information on opportunities and risks. The advertised investment concerns the purchase of fund units, not the purchase of specific underlying assets, such as shares or bonds of a company, as underlying assets are only owned by the fund. The sole basis for the purchase of shares in the fund are the current sales documents (basic information sheet (KID), sales prospectus, annual and semi-annual reports, if available). All information published here is for your information only and does not constitute investment advice or any other recommendation and is subject to change at any time. The sales documents and further information are available free of charge in German on the website A summary of investors' rights in German can be downloaded free of charge in electronic form from the website Consultation with an appropriate financial and tax advisor is recommended before investing in units in the Fund. The value of an investment and the amount of income may fall as well as rise as a result of market and exchange rate fluctuations. You may not get back the full amount originally invested. Past performance is no guarantee of future performance. The information published herein is based on the legal position as of the document date. This document and the information contained herein may not be distributed in the United States and distribution may be restricted in other jurisdictions. The Management Company may notify the distribution of units in the Fund in various EU or EEA member states. It should be noted that it may decide to withdraw the arrangements it has made for the distribution of units in the Fund in accordance with Article 93a of Directive 2009/65/EC. You can contact us by phone at +49 69 13 38 52 41 or write us an e-mail at All information has been provided with care according to the date of processing and partly reflects personal market opinions. No guarantee or liability can be assumed for their correctness and completeness.

Legal notice 

This article contains general information on the topic presented and no recommendations or suggestions on investments in financial instruments or issuers ("securities"). Possible specific information on individual securities, if applicable by naming them, is for illustrative purposes only and is also neither a recommendation nor a suggestion. An investment always requires a comprehensive consideration of all relevant aspects. This article does not claim to do so. Investments in securities are associated with risks. The value of an investment and returns from it can rise and fall (sometimes substantially). Investors may not get back the full amount originally invested. Past performance is no guarantee of future performance. Investments in securities may also be made for funds advertised on this website ("Fund"), but this is not mandatory. Information on positions of Fund can be obtained from the website and the relevant annual or semi-annual report, if available. The purpose of this article is to provide a rough overview of the relevant topic. No claim is made to completeness. Despite careful compilation of the information, no guarantee can be given for its correctness. We reserve the right to make changes. A purchase of shares in a fund or of securities should always be made only after one's own comprehensive analysis with recourse to various sources of information. Consultation with a financial advisor is recommended. The tax treatment of investment income depends on the personal circumstances of each investor and may be subject to change in the future. The sole basis for the acquisition of shares in a fund is the current sales documentation (sales prospectus, key investor information, annual or semi-annual report, if available). The sales documents and further information are available free of charge in German on the website

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