After years of underinvestment, Europe has been on a spending spree when it comes to aerospace and defense. Moves like this help propel an ETF like the VictoryShares International Free Cash Flow Growth ETF (GRIN ). This ETF provides exposure to European aerospace and defense companies with the potential to compound free cash flow (FCF) generation over time.
As research from Goldman Sachs noted, Europe’s recent defense spending is a stark contrast to previous years marked by underinvestment. This culminated in record spending thus far in 2025, with members of NATO agreeing to earmark 5% of their GDP specifically for bolstering their defensive capabilities by the year 2035.
Until recently, Europe has been heavily reliant on the United States for defense procurement; however, the U.S. is threatening to decrease its involvement in NATO affairs. This puts a larger onus on European nations to strengthen its defense mechanisms and achieve self-reliance.
As Europe continues to ramp up its defense spend, it may have a net positive effect on its economic growth. VettaFi’s Investment Case for European Defence highlighted the effects of defense spending on the nation’s economy.
The story arc of increased defense spending may benefit investments that provide exposure to European equities poised to capitalize on this future growth. GRIN is one such investment opportunity. It includes a European defense company — Rolls Royce Holdings — as its top holding, which has a 3.84% allocation, as of September 30.
A Free Cash Flow Opportunity
GRIN tracks the Victory International Free Cash Flow Growth Index (the Index). For inclusion in the Index, constituents must exhibit positive FCF growth, be highly profitable, and have strong growth prospects.
Regarding locating companies that offer value, FCF is an important metric to consider. It is the remaining cash that a company has after covering all expenses. It can be used to invest in growing the business, pay dividends, or pay down debt.
The Index specifically identifies companies that exhibit these FCF characteristics abroad, with 50% of the ETF allocated to European companies, as of September 30, 2025. As mentioned, the FCF must be sustainable over time. The Index takes into account FCF as a forward-looking measure. Therefore, it doesn’t just look at a company’s free cash flow from the past or its trailing performance. Instead, the Index factors in forward-looking FCF metrics in addition to trailing. Additionally, companies under consideration are filtered out by their growth prospects. As of September 30, 2025, there were exactly 100 holdings in the fund that exhibit these FCF characteristics.
GRIN’s international exposure makes it a strong potential portfolio diversifier for investors who may be overweight in U.S. equities. For those looking to overcome home bias, we believe this ETF could offer a compelling option.
VettaFi LLC (“VettaFi”) is the index provider for GRIN, for which it receives an index licensing fee. However, GRIN is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of GRIN.
For more news, information, and analysis, visit the Free Cash Flow Content Hub
Carefully consider a fund’s investment objectives, risks, charges and expenses before investing. To obtain a prospectus or summary prospectus containing this and other important information, visit vcm.com/prospectus. Read it carefully before investing.
All investing involves risk, including the potential loss of principal. The Fund has the same risks as the underlying securities traded on the exchange throughout the day. ETFs may trade at a premium or discount to their net asset value. International investments can be more volatile than the U.S. market due to increased risks of adverse issuer, political, regulatory, market, or economic developments and can perform differently from U.S. investments. Index Funds invest in securities included in, or representative of securities included in, the Index, regardless of their investment merits. The performance of the Fund may diverge from that of the Index. Investing in companies with high free cash flows could lead to underperformance when such investments are unpopular or during periods of industry disruptions. The fund could also be affected by company-specific factors that could jeopardize the generation of free cash flow. The Fund is new with a limited operating history. As a result, it does not have a record of performance or other dealings for prospective investors to evaluate when making investment decisions. *Large shareholders*, including other funds advised by the Adviser, may own a substantial amount of the Fund’s shares. The actions of large shareholders, including large inflows or outflows of cash, may adversely affect other shareholders, including potentially increasing capital gains. The value of your investment is also subject to geopolitical risks such as wars, terrorism, trade disputes, environmental disasters, and public health crises; the risk of technology malfunctions or disruptions; and the responses to such events by governments and/or individual companies.
The Victory International Free Cash Flow Growth Index measures the performance of profitable companies in the developed world, excluding the United States, that generate high free cash flow yield and higher growth characteristics. The indices are subject to sector country and individual security weight constraints. Constituents are weighted by free cash flow modified absolute momentum.
VictoryShares ETFs distributed by Victory Capital Services, Inc. (VCS). VCS is not affiliated with VettaFi.
20251031-4936774
