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OPTO Sessions Space: The final frontier, and Andrew Chanin’s big investment bet.

Think about it, you must. Closer than you think, the future is.’ Those are not prophetic words of Star Wars icon Yoda, but the investment theme behind ProcureAM’s Space ETF represented by symbols UFO in the US and YODA in Europe.

The fund is headed up by Andrew Chanin, and focuses on companies that are set to exploit opportunities that space has to offer, whether it’s colonisation, militarisation or simply everyday communications.

Chanin began his journey as an investor in 2007 as an ETF Trader at the Kellogg Group. He then joined Cohen Capital as an international trading director, before co-founding ProcureAM in 2017. The Procure Space ETF [YODA] is estimated to have a return of 21.85% in the first half of 2021.

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The Space Foundation estimates that the space sector was worth $447bn in 2020, up 4% year-on-year. An influx of private ventures and hefty government budgets have carved unique and lucrative opportunities that companies like Jeff Bezos’s Blue Origin and Richard Branson’s Virgin Galactic [SPCE] are hoping to cash in on.

But in such a future-facing market, it can be easy to get carried away with fancy technology over the real-world business case. Chanin’s fund, therefore, has set criteria on revenue generation before a stock can be included in the ETF.

What consumers don’t realise, Chanin told Opto Sessions, is that it’s more mundane things like satellite tech, which powered a multitude of activities on earth, that hold the best growth potential. From time-stamping digital stock market trades and creating secure work-from-home networks to tracking wildfire containment techniques and sending out weather warnings, the role of satellites is all encompassing.

“Satellites are an essential part of this infrastructure. They're acting as this digital toll operator for companies… Satellites are an almost essential [infrastructure] for many industries,” Chanin said. There is currently a race for space in the already crowded lower orbit which has nearly 8,000 satellites, but only a little over half are functional, Chanin added.

“Satellites are an essential part of this infrastructure. They're acting as this digital toll operator for companies… Satellites are an almost essential [infrastructure] for many industries"

 

Chanin anticipates there will be a scramble for that lower-orbit real estate as companies and countries launch private satellites to fulfil communication and data needs. “We are seeing a land grab for low Earth orbit, and many satellite technologies are reliant upon this low Earth orbit realm.” Around 30% of the revenue in the space sector is already derived from communication and data usage. Chanin sees this only growing from here.

There are, however, more interesting global ambitions that make the space sector exciting, such as the aim to colonize and militarise space. “We've certainly seen China announced many of its ambitions, such as building a permanent lunar colony by 2028 for research purposes, and potentially a permanent military colony on the moon by 2030,” Chanin said, pointoing out that the US isn’t one to be left behind. As such, he thinks it’s safe to assume the country will have similar plan.

The success of such ventures will depend on the ability to mine and utilise materials from outer space, because ferrying materials to and from Earth will be unviable.

“We've certainly seen China announced many of its ambitions, such as building a permanent lunar colony by 2028 for research purposes, and potentially a permanent military colony on the moon by 2030"

 

Complementary to this is the promise of space tourism. At the moment, this is a small industry and the prospect of getting passengers into a zero gravity zone for a few minutes at such high costs isn’t seem attractive. However, once capabilities scale up, for example to give people a couple of days orbiting the Earth, the segment may be transformed, Chanin said.

Another one of China’s ambitions is to harness solar energy in space, to beam it back down to earth as a power source. Whether this can be achieved remains to be seen, but that will not stop investment and ideation.

 

For more insights from Andrew Chanin, listen to the episode on Opto Sessions.

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