Industrial Reshoring and the Role of AIRR in Capturing U.S. Manufacturing Revival

The U.S. manufacturing sector is undergoing a seismic shift, driven by a confluence of policy tailwinds, supply chain reengineering, and a renewed focus on domestic production. At the forefront of this renaissance is the First Trust RBA American Industrial Renaissance ETF (AIRR), which has outperformed broader industrial ETFs like the Industrial Select Sector SPDR Fund (XLI) and the iShares U.S. Industrials ETF (IYJ) by leveraging its hyper-focused exposure to reshoring-driven growth. With a 16.9% gain over the past year as of November 2025, AIRR has proven its mettle in a thematic shift that is reshaping the industrial landscape.

Why AIRR's Strategy Resonates with Reshoring Trends

AIRR's outperformance stems from its deliberate concentration in small- and mid-cap U.S. industrial companies that are direct beneficiaries of the reshoring boom. Over 90% of its assets are allocated to the industrials sector, with holdings like Huntington Ingalls Industries (builder of U.S. Navy ships) and Mueller Industries (manufacturer of copper and brass products) exemplifying its alignment with domestic manufacturing according to analysis. This pure-play approach contrasts sharply with XLI, which, while also focused on industrials, includes a 20.7% weight in aerospace and defense giants like Lockheed Martin and Raytheon according to ETF trends. While these firms are undeniably industrial, their performance is often tied to defense budgets rather than the broader reshoring narrative.

Meanwhile, IYJ offers a more diversified approach, with 63.6% in industrials and significant allocations to financials and materials according to Nasdaq analysis. While this diversification reduces risk, it also dilutes exposure to the reshoring theme. For instance, IYJ's top holdings include Visa and Mastercard-companies that, while economically sensitive, are not directly involved in manufacturing according to Sum Growth. This structural difference underscores why AIRR, with its laser-like focus on domestic industrial production, is better positioned to capitalize on the $2.2 billion inflow into industrial reshoring ETFs in 2025.

Performance: AIRR's Sharper Edge

The numbers tell a compelling story. Over the past decade, AIRR has delivered a 19.35% annualized return, outpacing XLI's 13.08% according to portfolio comparison. Even with a higher expense ratio (0.70% vs. XLI's 0.13%), AIRR's risk-adjusted returns are superior, as evidenced by its Sharpe ratio of 0.60 compared to XLI's 0.55 according to performance analysis. This performance gap has widened in 2025, with AIRR's 16.9% one-year gain outperforming XLI's 16.1% according to Yahoo Finance. The key driver? AIRR's portfolio of smaller, agile firms that are scaling rapidly to meet the demand for reshoring production. For example, companies like Mueller Industries have seen surges in demand as firms prioritize domestic supply chains over overseas alternatives according to Seeking Alpha.

Thematic Tailwinds: Policy and Market Forces

The reshoring theme is not just a market fad-it's a structural shift. Federal incentives like the CHIPS Act and the Inflation Reduction Act have turbocharged domestic manufacturing, while corporate leaders are increasingly prioritizing supply chain resilience over cost minimization according to AMT research. AIRR's holdings are uniquely positioned to benefit from these trends. For instance, its exposure to community banks (a 10% allocation) aligns with the financing needs of small manufacturers expanding under reshoring initiatives according to Seeking Alpha. In contrast, IYJ and XLI lack this specificity, relying on broader industrial indices that include firms with global operations less tied to U.S. manufacturing.

Risks and Considerations

No investment is without risk. AIRR's higher volatility-driven by its concentration in small-cap stocks-means it's unsuitable for risk-averse investors. However, for those seeking to ride the reshoring wave, the trade-off is justified. IYJ and XLI offer more stability but at the cost of diluted exposure to the theme. As one analyst notes, "AIRR is the equivalent of a high-octane engine in a car; it's not for everyone, but if you're betting on the road ahead, it's the fastest route" according to Seeking Alpha analysis.

Conclusion: AIRR as the Reshoring Catalyst

The U.S. manufacturing revival is no longer a distant promise-it's a present-day reality. AIRR's outperformance against broader industrial ETFs is a testament to its strategic alignment with this shift. For investors seeking to capitalize on the reshoring boom, AIRR offers a compelling combination of thematic purity, performance, and growth potential. While IYJ and XLI remain viable options for diversified industrial exposure, they lack the precision and momentum that define AIRR's edge in this pivotal moment for American industry.