Germany prepares €100 billion fund to secure strategic assets

Germany is preparing to establish a 100 billion euro investment fund to secure strategic sectors such as defense, energy, and critical raw materials.

This investment vehicle, called the Deutschlandfonds (Germany Fund), will be designed to leverage government resources by attracting international investors, including venture capital and family offices.

According to a statement from the Ministry of Economy to Bloomberg, the fund will initially be supported by at least 10 billion euros in public funds, with the goal of mobilizing up to ten times that amount in private capital.

“The Germany Fund will be used to invest in growth, innovation, and competitiveness in cooperation with German and European private investors. Private capital is a significant lever for overcoming major economic challenges,” the ministry said in response to Bloomberg’s questions.

The new fund is part of the administration of Chancellor Friedrich Merz’s efforts to stimulate growth in Europe’s largest economy after a two-year contraction.

This initiative also reflects the increasing geopolitical risks as the German government seeks to protect key supply chains in response to the war in Ukraine, Donald Trump’s trade wars, and China’s assertive foreign policy.

The Ministry of Economy stated that the government’s resources for the Germany Fund are part of ongoing negotiations with the finance ministry and the state development bank KfW. The ministry declined to comment on the fund’s structure, investment strategy, and timeline.

According to sources close to the plan, after Merz approves the project and secures the support of Finance Minister Lars Klingbeil, the official launch will take place in September or October following the parliament’s summer recess.

One of the unresolved issues is whether the fund will be expanded to finance the development of affordable housing, a politically sensitive topic in Germany’s urban centers. Sources said the fund’s scope could be expanded after it becomes operational.

A raw materials fund initiated by the former Olaf Scholz government is not currently active and is expected to be integrated into the new structure. This fund was established to invest in significant mining projects in Germany and abroad.

Energy infrastructure will likely be a focal point for the fund. Germany holds shares in grid operators 50Hertz and TransnetBW and is considering acquiring the German assets of the Dutch-owned energy company TenneT and parts of the Dortmund-based Amprion. The aim is to consolidate state control over electricity transmission networks.

Similar plans are being discussed in the defense industry, which could also become part of the new fund. Berlin is negotiating for a blocking minority stake in the Franco-German arms manufacturer KNDS and is in talks to purchase shares in ThyssenKrupp’s submarine division. The fund’s portfolio will also include smaller, early-stage investments in domestic defense startups.

Beyond strategic assets, the Germany Fund aims to strengthen domestic capital markets, where private companies are more reluctant to invest in higher-risk projects, especially those of small and medium-sized enterprises, thereby limiting their potential.

The fund is intended to be a hybrid instrument between traditional state subsidies and market-oriented venture capital. This structure makes it possible to provide more resources to international investors with the government’s seal of approval.

Despite tensions between the CDU and SPD, the financing for the fund has been secured. The ruling coalition recently approved a 500 billion euro infrastructure spending package. Furthermore, since equity investments are considered financial transactions, it bypasses the country’s constitutional debt brake.

This initiative fulfills a commitment signed as part of the coalition agreement that paved the way for coming to power in May. It will also be the first signature project of the new Economy Minister, Katherina Reiche, a former executive from the energy sector.