ACCE Defense & Aerospace index sits at NAV 982.02 with GD, HII, NOC, LHX, LMT, and RTX each holding 14-17% weights. Here's what drives the construction.
The ACCE Defense & Aerospace index carries a NAV of 982.02 as of early June 2026. Six names account for the bulk of the weight, each sitting between 14% and 17% of the portfolio. That tight clustering is deliberate. This is not a momentum-chasing vehicle; it is a concentrated bet on the prime contractors that underpin Western military capability at a moment when defense budgets across NATO and the Indo-Pacific are expanding at the fastest pace in decades.
Here is how the index is built, why the weights look the way they do, and what the macro backdrop means for the holdings.
The Core Six and How the Weight Is Split
The six primary holdings are General Dynamics (GD) at 17%, Huntington Ingalls Industries (HII) and Northrop Grumman (NOC) each at 16%, L3Harris Technologies (LHX) at 16%, Lockheed Martin (LMT) at 15%, and RTX Corporation (RTX) at 14%. Together they represent 94% of the index. The remaining 6% is spread across TransDigm Group (TDG) at 6% and three smaller names, BWX Technologies (BWXT), Kratos Defense & Security Solutions (KTOS), and Leidos Holdings (LDOS), each carrying negligible weight at this time.
The near-equal distribution across the top six reflects a structural view: no single prime contractor dominates the threat-response landscape. Lockheed Martin owns the F-35 program and hypersonics. Northrop Grumman controls the B-21 Raider and space systems. General Dynamics runs the Columbia-class submarine program alongside its Gulfstream business jet unit. RTX supplies propulsion and missile systems across virtually every major platform. L3Harris specializes in electronic warfare and communications. Huntington Ingalls is the sole builder of nuclear-powered aircraft carriers for the U.S. Navy.
Each of these franchises is effectively a regulated monopoly or duopoly within its segment. Switching costs are measured in decades, not quarters.
Why Defense, Why Now
The geopolitical case barely needs restating. European NATO members are racing toward the 2% GDP defense-spending threshold, with Germany, Poland, and the Nordics pushing well beyond it. The U.S. defense budget request for fiscal year 2026 prioritizes shipbuilding, missile defense, and next-generation air dominance, all areas where the index's core holdings are primary beneficiaries.
Backlog is the metric that matters most in this sector. Prime contractors book revenue years in advance. A contract awarded today may not flow through the income statement until 2028 or 2029. That means near-term earnings are largely locked in regardless of short-term budget noise in Washington. The index construction leans into this dynamic by weighting toward companies with the deepest, most diversified backlogs.
Huntington Ingalls, for example, is the only shipyard capable of building nuclear carriers and one of two capable of building nuclear submarines. Its order visibility stretches well beyond a decade. Northrop Grumman's B-21 program is a multi-decade production run with no competitive alternative. These are not cyclical businesses in the traditional sense.
TransDigm: The Outlier Worth Watching
TransDigm Group (TDG) sits at 6%, a meaningful underweight relative to the core six but not a token position. TransDigm operates differently from the primes. It acquires proprietary aerospace components, typically sole-source parts with no aftermarket competition, and extracts pricing power over the life of the platform. Margins run substantially higher than the primes. The business model is closer to a toll road than a defense contractor.
The 6% weight reflects both the opportunity and the risk. TransDigm carries significant debt from its acquisition strategy, and its valuation has historically commanded a premium to peers. At current index construction, it adds margin profile diversification without dominating the risk budget.
The Bench: BWXT, KTOS, LDOS
BWX Technologies (BWXT), Kratos Defense & Security Solutions (KTOS), and Leidos Holdings (LDOS) currently sit at negligible weights. That does not mean they are unimportant to the thesis; it means they are at earlier stages of meeting the index's quality and scale thresholds.
BWXT is the primary supplier of naval nuclear reactors and has a growing role in space nuclear power. Kratos builds low-cost tactical drones and jet-powered target systems, a segment that has attracted significant Pentagon interest as attritable unmanned systems become central to modern warfare doctrine. Leidos is a large IT and intelligence services contractor with a strong position in classified programs.
As these businesses scale and their financial profiles mature, their index weights can increase. The current construction treats them as optionality rather than core exposure.
What the NAV Tells You
At 982.02, the index NAV sits just below the 1,000 baseline, which signals that the index has given back some ground from its high-water mark. Defense stocks broadly pulled back in early 2026 as investors rotated toward AI and consumer recovery plays. That compression happened against a backdrop of accelerating order flow and rising backlog across the sector, a divergence between price action and fundamental momentum that the index is designed to capture over a full cycle.
The tight weighting across the core six also means the index does not live or die on any single program decision or contract award. A delay in one F-35 lot does not crater the portfolio because Lockheed Martin sits at 15%, not 40%.
The Smaller Names and Future Construction
The presence of BWXT, KTOS, and LDOS at near-zero weights is a feature of how the index evolves. New entrants earn weight through demonstrated financial performance and strategic relevance, not just thematic fit. A company building drone swarms is thematically compelling; a company building drone swarms with consistent revenue growth, expanding margins, and a defensible competitive position earns a real allocation.
Kratos in particular bears watching. The Pentagon's push toward low-cost attritable drones, systems designed to be expendable in contested airspace, aligns directly with Kratos's product line. If that program scales the way early indications suggest, the weight assigned to KTOS within this index will reflect it.
The defense sector enters the second half of 2026 with budget tailwinds, multi-year backlog visibility, and a geopolitical environment that shows no sign of reducing procurement urgency. The index's current construction, anchored by six prime contractors with complementary platform exposure, is built to compound through that environment steadily rather than spike on any single catalyst.
