Luxembourg Launches the National Defence Fund — €150 Million for Defence and Dual-Use Innovation

Luxembourg's Ministry of Finance, the Directorate of Defence, the Ministry of the Economy and the National Credit and Investment Institution (SNCI) launched the National Defence Fund — Fonds National de Défense, FND — on 30 April 2026. The fund is structured as a five-year, €150 million instrument designed to develop a national ecosystem of innovative companies in the defence and dual-use sectors.

How it is funded

The €150 million envelope comes from three sources. €75 million is drawn from the FSIL, Luxembourg's Intergenerational Sovereign Wealth Fund, which makes the FND one of the most strategically signalled deployments of FSIL capital since the fund's creation. €50 million comes from the State budget. €25 million is contributed by SNCI, Luxembourg's national investment institution. The split — half from the sovereign wealth pool, a third from the budget, the remainder from the development bank — is deliberate: it gives the FND credibility as a long-horizon strategic vehicle rather than a one-off political instrument.

What it backs

Startups, scale-ups and innovative companies active in the defence and dual-use sectors. The fund's investment policy targets the four areas defined as priorities in Luxembourg's broader defence strategy: cybersecurity, space, advanced materials and automation. Each is consistent with where Luxembourg already has industrial mass — SES and the wider space sector, ArcelorMittal and the steel-and-materials base, the cyber-fortress exercise architecture — and where dual-use upside lets the country compete without needing scale.

Why now

NATO commitments. Luxembourg must allocate 2% of GNI to defence in 2026 and is on a trajectory toward 5% of GNI by 2035, an estimated €4.6 billion per year at full ramp-up. That trajectory cannot be funded only through traditional procurement; building an indigenous defence-industrial ecosystem is the multiplier that lets the country meet its commitments without becoming a pure buyer of foreign hardware.

How it complements the Defence Bond

The Defence Bond, launched earlier in 2026, addresses the financing-the-spend question by mobilising retail savings against the defence budget. The FND addresses the build-the-ecosystem question by deploying state capital into early- and growth-stage companies whose products feed back into Luxembourg's procurement and exports. The two instruments work in parallel: one funds the demand side, the other underwrites supply.

What the next 18 months will tell us

Three things. The first set of FND portfolio investments — public disclosure on which sectors and stages it actually backs first. Whether co-investment partners (other European sovereign vehicles, NATO allies, EU defence-fund mechanisms) anchor alongside. And whether the FND can deliver the kind of late-stage scale-up support that the existing Luxembourg startup ecosystem — strong on early-stage fintech and space — has historically struggled to access in defence and dual-use.