Europe’s First Private Credit Fund for Defence SMEs

The establishment of a dedicated financial instrument targeting the European defence sector marks a significant institutional development in the intersection between security policy and capital markets. For decades, European defence has been financed primarily through government budgets, complemented by limited private equity and occasional industrial partnerships. The creation of Sienna Hephaistos Private Investments, with the European Investment Fund acting as cornerstone investor, demonstrates a structural shift toward the mobilisation of private debt to reinforce the industrial base. The logic underpinning this initiative is rooted in the recognition that Europe’s security cannot depend solely on public expenditure or reliance on non-European suppliers. Instead, there is an urgent need to broaden the spectrum of financing channels available to small and mid-sized firms that constitute the backbone of the defence value chain. This development takes place against the background of heightened geopolitical instability, the pressure to accelerate rearmament, and the emergence of strategic autonomy as a guiding European principle.