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Globally deteriorating security situation meets with increased defense investments
Global Security Fund delivered a 12.93% return in January amid heightened geopolitical risks and direct military operations. The year 2026 has been characterized by the geographic expansion of geopolitical risk across multiple regions, increasingly intertwined with factors such as energy security, trade routes, access to technological components, and critical raw materials. Tensions are evident in Latin America, the APAC region, and the Middle East. In Europe, the war in Ukraine continues to dominate the regional security landscape, unfolding during one of the harshest winter climates in a decade. Developments in the Arctic further underscore how great-power rivalry and geostrategic competition are becoming increasingly complex.
During the winter, the United States published both its National Security Strategy (NSS, December 2025) and its National Defense Strategy (NDS, January 2026). These policy documents signal a clearer U.S. focus on near-regional security and an increased expectation that allies assume greater responsibility for their own defense capabilities. This shift has contributed to rising friction within the transatlantic relationship, particularly on issues related to the Arctic, Greenland, and NATO’s rebalancing, as well as its long-term purpose and mission.
In parallel, the United States has signaled a more assertive posture in the Western Hemisphere, applying increased political pressure on countries such as Venezuela, Colombia, and Cuba, while also making clearer statements regarding strategic interests in the North Atlantic and the Arctic. In addition, the U.S. continues to emphasize its strategic focus on the APAC region. Collectively, these developments reinforce Europe’s incentives for more autonomous decision-making, independent defense capabilities, and expanded partnerships with countries such as Canada, Japan, and Australia.
At the same time, Europe has demonstrated cohesion and a clearer ambition to strengthen its strategic autonomy. The European Commission’s Readiness 2030 initiative, with a framework of up to EUR 800 billion, illustrates Brussels’ focus on industrial resilience and long-term defense build-up. Since February 2022, approximately EUR 210 billion in defense contracts have been signed, with more than half allocated to European systems. This creates a structural tailwind for European defense companies through increased budgets and broader industrialization of the sector. We also expect European companies to increase their market share in procurement by European states.
Company-Specific Commentary
A clear example of Europe’s ambition to build integrated defense capabilities is the European Sky Shield Initiative (ESSI). Now comprising more than 20 nations, the initiative aims to establish an integrated air defense system through joint procurement.
Germany’s acquisition of the Israeli-American Arrow 3 system, valued at close to EUR 4 billion, currently serves as an interim solution, as Europe lacks its own operational capability to counter ballistic threats at altitudes above 100 km (exo-atmospheric). Nevertheless, the ambition to achieve technological sovereignty is evident. Within the framework of PESCO and the European Defence Fund, the TWISTER (Timely Warning and Interception with Space-based TheatER surveillance) program is being developed as Europe’s future early-warning and missile defense architecture.
Several important milestones were reached in January:
- ODIN'S EYE II: Serving as the space-based “eye” of TWISTER, the ODIN’S EYE II missile warning system achieved key milestones during the month. The project, coordinated by Germany’s OHB System AG, brings together an industrial consortium of 43 companies from 14 member states. With a confirmed EUR 90 million contribution from the European Defence Fund, efforts are now focused on completing the advanced simulator that will form the basis of Europe’s future early-warning satellite constellation. OHB is held in the fund’s portfolio and delivered a return of 138 % during January.
- HYDIS-2 and new contracts: To address the evolving threat environment, development of the European interceptor continues under the HYDIS-2 program. In January 2026, MBDA announced a landmark development contract for the so-called “One Way Effector.” MBDA is jointly owned by Airbus, BAE Systems, and Leonardo — all of which are holdings in the fund’s portfolio. The system is designed to operate in modern air defense environments, marking a new phase in European doctrine where volume production is combined with advanced technology.
| Januari 2026 – Top Performers | Januari 2026 – Bottom Performers | ||
| OHB | 138% | NEXTNAV | -14% |
| HANWHA SYSTEMS | 70% | IONQ | -11% |
| KENCOA AEROSPACE | 59% | CLOUDFLARE | -10% |
| AST SPACEMOBILE | 53% | FINCANTIERI | -9% |
| KOREA AEROSPACE | 44% | EOS | -8% |
The fund continues to monitor Europe’s transition from being primarily a buyer of security to increasingly becoming a producer — and, over time, a larger exporter, particularly to the APAC region. We emphasize that this transformation will unfold over an extended period. During this time, U.S. defense companies retain superior capabilities, production capacity, and leadership in defense technology.
The investment team aims to maintain a balanced yet actively weighted defense exposure across regions and sectors that reflect this evolving landscape. This is carried out in close collaboration with our experienced Advisory Board, which is continuously being further strengthened.
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