Space exploration presents a lucrative opportunity for investment
The commercial space sector is currently experiencing robust growth, with the global space economy valued at around $418 billion in 2024 and forecasted to reach $788 billion by 2034. This growth represents a compound annual growth rate (CAGR) of approximately 6.7%, and the in-space manufacturing, servicing, and transportation market alone is projected to grow at a CAGR of about 19.5% through 2029.
A Highly Attractive Asset Class for Institutional Investors
The commercial space sector's consistent, high-growth outlook combined with its foundational role in emerging technological infrastructure makes it highly attractive for institutional investors. Here are some reasons why:
Growth Potential and Innovation
The commercial space sector is a frontier of innovation with accelerating demand for satellite services, launch capabilities, and space-based infrastructure, offering long-term growth prospects attractive to institutions seeking portfolio diversification.
Essential Infrastructure and Market Expansion
Satellite manufacturing and services (communications, Earth observation, navigation) comprise roughly 68% of commercial space activity, underpinning critical global communications and data networks, which have increasing economic importance worldwide.
High Barriers to Entry and Technological Advantage
Companies like SpaceX have technological moats, such as reusable rockets lowering launch costs drastically, that create durable competitive advantages, allowing stable market share that institutional investors value.
Resilience and Diversification
Despite some volatility due to venture capital corrections, space investments maintain high interest as a strategic asset class that is relatively uncorrelated with traditional markets, potentially improving portfolio resilience.
Growing Institutional Appetite
While direct data on pension funds specifically is limited, broader institutional investment trends show increasing allocations to private equity and innovative infrastructure with strong growth and resilience profiles, traits commercial space offers.
Europe's Role in the Commercial Space Sector
Europe, including the UK, still has a long way to go in developing a strong space economy, with most of its limited partners being American. However, Luxembourg is setting the pace in Europe with initiatives like the Luxembourg Space Agency's commercial model, leadership on space resources, and 'Space for Finance'.
The Real Value in the Space Sector
The real value in the space sector lies with data platforms, analytics firms, component manufacturers, and application providers that have strong recurring revenue, global customers, and a fast-growing market. Traditional industries like insurance, agriculture, energy, infrastructure, and logistics are the largest users of space-derived data.
Space technology is crucial for industries like insurance, allowing them to assess and manage risk more effectively, such as predicting wildfires in California. However, institutional investors do not yet have a 'space' cell on their spreadsheets, and space investments are often split across unrelated categories.
The Future of the Space Sector
The extent to which AI will supercharge the growth of the space sector has yet to be seen. The space sector has matured, with many businesses having proven business models and strong customer bases. NewSpace Capital invests in growth-stage companies that have proven technology, real customers, and solid revenues.
Space infrastructure can encompass both speculative technologies and companies providing steady returns. The technology risk in the space sector has largely dissipated, with the focus now on execution risk. The space sector has become a standalone asset class, comparable to fintech or renewables.
As the space sector continues to grow and mature, it is fast becoming the must-have investment for institutional investors. However, institutional investors need to disaggregate the space sector according to its risk profiles to make informed decisions. European capitals need to signal demand and de-risk investment for Europe to catch up and develop a serious space economy.
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