Germany’s sovereign wealth fund announced it will drop the long‑standing ban on holdings in weapons manufacturers. The policy shift reflects mounting pressure as geopolitical tensions tighten across Europe and beyond. Investors in the fund will now be able to allocate capital to companies that produce defence equipment and strategic assets, a move that could reshape portfolio composition for its sizeable assets in the coming years.

The decision overturns a precaution adopted after World War II, when many public investors excluded defence‑related firms on ethical grounds. By reopening the door, the fund signals that risk‑adjusted returns now outweigh earlier moral considerations. Market participants will watch how the change influences demand for defence stocks, potentially lifting valuations for firms previously sidelined by sovereign investors.

For portfolio managers, the policy adjustment opens a new asset class within a fund that commands billions of euros. Companies manufacturing armaments may see fresh inflows, tightening supply of capital for rivals in civilian sectors. The move underscores how Germany’s sovereign wealth fund is adapting investment rules to align with shifting security environments, directly impacting capital flows in the defence industry.