LAS VEGAS — The space industry is largely insulated from the variations in other parts of the economy, a new analysis found, which could make it attractive to investors seeking to diversify their portfolios.
The study by space venture capital firm SpaceFund, presented at the AIAA ASCEND conference July 30, found that the growth of the space economy was only weakly correlated, at most, with major market indices and other investment classes.
The analysis compared the growth of the overall space economy and the subset devoted to commercial activities, as calculated by The Space Foundation, with major stock indices and other asset classes, such as oil, gold and bitcoin. The analysis, from 2005 to 2022, showed only weak correlation between the space industry’s growth rates and changes in those other assets.
Meagan Crawford, co-founder of SpaceFund, said in an interview that one reason for that lack of correlation is that the space industry has seen continuous growth during that time even as other sectors suffered declines, such as in recessions. “Where you see everything dipped, space continued to grow.”
Space appears insulated from those market gyrations. “We think in large part it’s because of the government dollars that go into this industry,” she said. “The space industry just seems to exist outside of the normal markets, which is fascinating.”
That insulation and continued growth could make space attractive to institutional investors. Crawford noted that SpaceFund is talking with such investors as it works to raise its third fund. “Retirement funds, pension funds and university endowments all use correlation as one of their basic measures for how to balance their portfolio,” she said. “Most of those asset allocators don’t even see space as an option that they should be including in their correlation calculations. It’s not even on their radar.”
She said she hopes the analysis both helps SpaceFund raise money and raise awareness about the unique aspects of space to the broader investment community. “The idea is that this can help asset allocators start thinking about space.”
Crawford noted, though, that space’s insulation from the broader market may erode over time as it shifts to serving more consumer markets, like satellite broadband and direct-to-device services. “That will start to bring the space industry back in line with general markets, because if consumer spending is weak because of market conditions, you’re going to see that hit” in space companies serving consumer markets, she argued.
She estimates that evolution will take 10 to 15 years to complete. “So now is really the time to be doing that investing in the industry.”
