The Hybrid Warfare Canadian ETF Portfolio

A lot of newer defense investors get fixated on the obvious: bombs, bullets, and boots on the ground. That line of thinking usually funnels you straight into the same group of five U.S. prime contractors: RTX, Lockheed Martin, General Dynamics, Boeing, and Northrop Grumman.

These are the backbone of the American military-industrial complex. They are called prime contractors because they sit at the top of the defense procurement chain, winning massive government contracts and subcontracting work out to smaller suppliers.

There is nothing inherently wrong with these companies. They have deep relationships with governments, massive backlogs, and have been steadily modernizing their capabilities.

But from an investment standpoint, they are not always the most exciting. These are large, mature businesses. It is much easier for a $5 billion mid-cap company to double than it is for a $100 billion boomer behemoth to do the same.

At the same time, warfare itself is changing. The objective remains the same, to weaken or defeat your adversary, but the methods continue to evolve. Humans have become increasingly creative in how those objectives are achieved.

On the kinetic side, that includes precision-guided missiles, autonomous drones, and increasingly sophisticated surveillance and targeting systems. But just as important is the shift toward the intangible side of conflict, particularly cybersecurity.

Countries like Iran and North Korea have developed dedicated cyber warfare units that target critical infrastructure, financial systems, and communications networks. These attacks are cheaper to execute, harder to attribute, and can be just as disruptive as physical strikes.

Even closer to home, the Canadian Armed Forces are actively recruiting cyber operators to monitor networks, respond to unauthorized access attempts, and defend critical systems.

With that in mind, today’s ETF portfolio takes a hybrid approach. We are combining exposure to defense contractors with cybersecurity firms through two ETFs via Global X Canada and Evolve ETFs.

As with any thematic strategy, this comes with greater risk, higher fees, and limited diversification. But if you are looking to express a specific view on how modern conflict is evolving, this is one way to do it.

50% in Global X Defense Tech Index ETF (SHLD)

Half of this portfolio is allocated to the Global X Defense Tech Index ETF (SHLD). Since launching in April 2025, SHLD has gained traction quickly, growing to about $260 million in assets under management. The ETF currently charges a 0.49% management fee.

What stands out here is how thoughtfully the benchmark is constructed. Most aerospace and defense ETFs tend to be heavily skewed toward traditional aerospace companies, which introduces a lot of cyclicality tied to commercial aviation demand.

SHLD takes a different approach. It deemphasizes those pure-play aerospace names and instead leans more into defense contractors with direct exposure to military spending and advanced systems.

You still get the familiar primes like Lockheed Martin, RTX, General Dynamics, and Northrop Grumman, along with firms like L3Harris. But unlike many U.S.-focused defense ETFs, SHLD is not overly concentrated in those names. It has a global footprint.

That means exposure to companies such as Rheinmetall, BAE Systems, Hanwha Aerospace, and Thales, which broadens the opportunity set beyond just the U.S. defense ecosystem.

Another key difference is that SHLD is not confined strictly to the industrials sector. One of its top holdings is Palantir Technologies at around 5.6%.

That inclusion makes sense. Palantir builds software platforms used by governments and military organizations for data integration, intelligence analysis, and decision-making. Its systems help process vast amounts of information, identify patterns, and support operational planning in real time.

In modern warfare, where information dominance is just as important as firepower, companies like Palantir are increasingly central to defense strategy.

50% in Evolve Cyber Security Index Fund (CYBR)

The other half of the portfolio is allocated to the Evolve Cyber Security Index Fund (CYBR). This ETF charges a 0.40% management fee and tracks the Solactive Cyber Security Index in a Canadian dollar hedged format. The holdings complement SHLD well, with very little overlap.

Instead of defense contractors, CYBR focuses on companies that secure digital infrastructure. That includes names like Palo Alto Networks, Fortinet, CrowdStrike, Check Point Software, Zscaler, and Okta.

Broadly speaking, these firms provide services such as network security, endpoint protection, identity management, and cloud security. These are the systems that prevent unauthorized access, detect intrusions, and protect sensitive data across corporate and government networks.

You have probably interacted with some of these technologies without realizing it. Things like multi-factor authentication prompts, secure login systems, and corporate VPN access are often powered by companies like Okta or Zscaler. These services are critical.

Governments, financial institutions, healthcare systems, and large enterprises all rely on cybersecurity providers to keep their operations running securely. As more infrastructure moves online and becomes interconnected, the importance of these firms only increases.

A notable addition in the portfolio is the inclusion of Nebius Group and CoreWeave. These are not cybersecurity firms. Instead, they are more closely tied to artificial intelligence (AI) infrastructure.

Nebius is focused on AI cloud services and data infrastructure, while CoreWeave provides high-performance cloud computing built specifically for AI workloads. Their inclusion adds a layer of exposure to the computing backbone that supports both cybersecurity and modern digital operations.

In total, CYBR holds 44 companies and has about $146 million in assets under management. It also has a longer track record than SHLD, with an inception date going back to September 2017.