By Sudip Kar-Gupta

BRUSSELS, Jan 20 (Reuters) - Demand for a leading defence sector exchange-traded fund $(ETF.AU)$ has been growing ahead of the return of Donald Trump to the White House, said investment company and ETF issuer VanEck.

The European arm of the New York-headquartered company launched its VanEck Defense UCITS ETF DFNG.L in March 2023. It rose around 55% in 2024 and is already up around 8% at the start of 2025, with assets under management of around $1.8 billion.

"We are observing strong momentum in the defense sector. Since the launch of our fund, we've experienced consistent inflows with the ongoing global geopolitical tensions being the main interest driver," said VanEck EU CEO Martijn Rozemuller.

Earlier this month, Trump said NATO members should spend 5% of their gross domestic product on defence, a significant increase from the current 2% target.

Officials and analysts have also told Reuters they expect NATO to agree to go beyond this current defence spending target.

"As the political climate evolves, so too does investor sentiment towards defense stocks. Just a few years ago, the sector was taboo for most institutional investors. Today, with supporting government policies, the contrast could not be bigger," added Rozemuller.

The ETF's top holdings include Palantir Technologies PLTR.O, Thales TCFP.PA, Booz Allen Hamilton BAH.N and Leonardo LDOF.MI.

(Reporting by Sudip Kar-GuptaEditing by Mark Potter)

((sudip.kargupta@thomsonreuters.com;))