REX Drone ETF (DRNZ) March 2026 Commentary
March Recap: Earnings Pullback Amid Accelerating Defense Tailwinds
Fund Snapshot
- NAV: $24.58
- Fund Assets: $82.6M
- 1M Inflows: +$27.9M
- 3M Inflows: +$58.8M
- # of Holdings: 49
- March Return: -8.1%
- YTD Total Return: +13.08%
- 52 Week Range: $18.00 – $30.12
- Total Expense Ratio: 0.65%
As of March 31, 2026. For current standardized performance, click here.
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. Performance current to the most recent month-end can be obtained by calling 1-844-802-4004. Short term performance, in particular, is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns.
Commentary
- March Performance: DRNZ returned –8.1% in March mainly due to the 35% price decline in the fund’s largest holding: AeroVironment NYSE: AVAV (11% weight). This loss was driven by AVAV’s fiscal third quarter 2026 earnings report ($0.64 actual v. $0.68 estimated) and FY26 forward guidance update ($3.48 to $2.93) that were both below analyst expectations. Management cited program specific disruptions in the Space unit due to government funding and shutdown delays, as well as integration issues with their BlueHalo acquisition, as drivers of the shortfall. AVAV’s Drone business continued to show strong growth, particularly their Uncrewed Aircraft Systems products.
- Year-To-Date: DRNZ has returned +13.08%, outpacing broad market indices and Defense ETF competitors. The fund is trading approximately 18% below its 52-week high of $30.12, offering a potential entry point for conviction investors with a multi-year defense modernization thesis.
- Fund Flows Accelerating: Net inflows of $27.9M over the past month and $58.8M over the past three months signal accelerating institutional and retail appetite for pure-play drone exposure. Since inception in October 2025, the fund has accumulated $84.7M in total net flows.
- Secular Growth Intact: The UAV market is projected to grow at a 16.77% CAGR from 2026 to 2035, with the shift toward drone-as-a-service models opening recurring software and maintenance revenue streams. The global drone market is forecast to reach $147.8 billion by 2036, up from $69 billion today. This is a structural trend that extends well beyond near-term defense spending cycles.
Top Holdings
As of 3/31/2026
The fund’s top 5 holdings represent a deliberate mix of US and international pure-play operators spanning tactical defense drones, counter-drone systems, and drone communications infrastructure. The top 10 holdings account for ~69% of assets.
| Ticker | Company | Weight |
|---|---|---|
| AVAV | AeroVironment Inc. | 11.19% |
| NXSN | NextVision Stabilized Systems | 11.18% |
| ONDS | Ondas Holdings Inc. | 10.40% |
| DRO | DroneShield Ltd. | 6.35% |
| ELS | Elsight Ltd. | 5.33% |
| EH | Ehang Holdings Ltd. | 4.73% |
| RCAT | Red Cat Holdings Inc. | 4.14% |
| FLT | Volatus Aerospace Inc. | 4.03% |
| UMAC | Unusual Machines Inc. | 3.85% |
| TYO | Terra Drone Corporation | 3.04% |
Key Investment Catalysts
|
Global Defense Spend 2025
$2.63T
+6% v. 2024
|
German 2026 Defense Budget
$127B
+34% v. 2025
|
US FY2027 Defense Proposal
$1.5T
+44% v. FY2026
|
President Trump’s proposed $1.5 trillion defense budget for FY2027 (44% above the FY2026 level) could channel an estimated $63 billion toward unmanned systems, more than 6x current drone spending levels. Top DRNZ holdings AVAV and ONDS are direct beneficiaries.
United States Defense Budget
| Fiscal Year | Budget | YoY Change |
|---|---|---|
| FY2023 (enacted) | $858B | +9.7% |
| FY2024 (enacted) | $886B | +3.3% |
| FY2025 (enacted) | $892B | +0.7% |
| FY2026 (enacted) | $1,000B | +12.1% |
| FY2027 (proposed) | $1,500B | +50.0% |
Breakdown of Potential Drone Related Military Spend
| Category | FY2026 | FY2027 Est. |
|---|---|---|
| Defense Autonomous Warfare Group (DAWG) | $0.2B | $54.6B |
| Aerial UAV (Unmanned Aircraft) | $9.4B | ~$18.0B |
| Counter UAS Systems | $3.1B | ~$6.0B |
The Defense Autonomous Warfare Group received just $225 million in FY2026 but is proposed to receive $54.6 billion in FY2027, a budget that would exceed the entire Marine Corps FY2026 appropriation. The FY2026 budget was the first year DoD broke out its autonomy line as its own section, a notable commitment and demand signal that validates the pure-play drone ETF thesis.
Sources: REX Shares, Needham Research, IISS Military Balance 2026, NATO, White House FY2027 budget blueprint, EU Parliament Research Service, National Defense Magazine, DefenseScoop, Aviation Week. US 2027 figure is a proposal pending congressional approval. China figure is declared budget; actual spend estimated higher.
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THE FUND, TRUST, ADVISER, AND SUB-ADVISER ARE NOT AFFILIATED WITH THE FUND’S UNDERLYING SECURITIES.
The Fund’s investment exposure is concentrated in the same industries as that assigned to the underlying securities. Some or all of these risks may adversely affect the Fund’s net asset value (“NAV”) per share, trading price, yield, total return, and/or ability to meet its investment objective. The value of the Fund, which focuses on underlying securities in the industrials sector, may be more volatile than a more diversified pooled investment or the market as a whole and may perform differently from the value of a more diversified pooled investment or the market as a whole.
Drone and UAV Companies Risk. Drone and UAV companies are closely tied to the economic fortunes of such companies’ research, design, manufacture, operation, or enabling technologies of drones and other unmanned aerial systems. The market for drone and UAV-related products and services is nascent, highly competitive, and characterized by rapid technological change, evolving regulatory frameworks, and heightened geopolitical sensitivities. Many drone and UAV companies are smaller, less seasoned issuers that may be more vulnerable than larger, diversified companies to fluctuations in demand, supply-chain disruptions, product obsolescence, patent or trade-secret litigation, and may have limited access to capital.
Emerging Markets Risk. Investments in securities issued by governments and companies operating in emerging market countries involve additional risks relating to political, economic, or regulatory conditions not associated with investments in securities and instruments issued by U.S. companies or by companies operating in other developed market countries.
Equity Securities Risk. Equity securities are subject to changes in value, and their values may be more volatile than those of other asset classes.
High Portfolio Turnover Risk. The Fund may actively and frequently trade all or a significant portion of the Fund’s holdings. A high portfolio turnover rate increases transaction costs, which may increase the Fund’s expenses.
Concentration Risk. The Fund will be concentrated in an industry or a group of industries to the extent that the Index is so concentrated. To the extent the Fund has significant exposure in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the Fund’s investments.
Liquidity Risk. The Fund may hold certain investments that may be subject to restrictions on resale, trade over-the-counter or in limited volume, or lack an active trading market.
Funds distributed by: Foreside Fund Services, LLC, member FINRA, not affiliated with Rex Shares, LLC, or its affiliates.
