Private equity's pivot toward defence assets is accelerating as limited partners overcome ESG hurdles and regulatory barriers. Public pensions, endowments, and insurance companies are increasingly comfortable with defence investments, with some investors removing longstanding restrictions on defence-related assets. Fordham University CIO Geeta Kapadia noted her institution has become "generally agnostic" about defence investments, maintaining only certain red lines.

Texas's Teacher Retirement System, with its $230 billion portfolio, has invested in defence tech funds for years without governance issues. The sector's appeal is growing as investors recognize its potential, though concerns about oversaturation are emerging. Venture firms invested $17.9 billion in defence tech startups last year, more than double the previous year's amount according to CB Insights data.

JF Lehman & Company is capitalizing on this trend, launching its seventh flagship fund with a $2.74 billion target and $3.25 billion hard cap. The New York-based firm, founded in 1992 as a defence sector specialist, closed its predecessor on $2.23 billion in 2024. Meanwhile, North Carolina's UNC Management Company named Stefan Strein as its new CIO, inheriting a portfolio with 32.4 percent allocation to private equity against a 27 percent target.