Is resilience becoming the new impact trade and what does it mean for fund operations?

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Defence investing has long sat in a complex place in institutional portfolios: strategically important, politically sensitive and often addressed through broad exclusions rather than careful definition. That framing is now shifting. Not because allocators have become indifferent to responsibility, but because geopolitical risk has become more tangible and persistent, and the definition of impact is being tested against the realities of security, resilience and continuity.

In the US and across Europe, policy volatility and national security priorities are no longer background considerations. They are debated daily, often publicly, and frequently with limited predictability. Capital tends to respond quickly in that kind of environment, not because it is chasing headlines, but because it is reassessing long-term risk.

The scale of that reassessment is significant. In the US, defence spending is anchored by a Department of Defense (DoD) budget request of approximately $850 billion for FY2025, with Congress authorising around $901 billion for FY2026 through the National Defense Authorization Act. That level of sustained commitment reflects a structural reprioritisation of security, continuity and resilience as economic fundamentals rather than cyclical policy choices.

The same direction of travel is visible across allied markets. Industry analysis published by McKinsey & Company suggests that European NATO countries could increase defence and security-related investment materially by the end of the decade, with aggregate annual spending potentially approaching €800 billion to €1 trillion by 2030 under accelerated rearmament and resilience scenarios.

The practical implication for fund managers is that long-dated government programmes are reshaping the opportunity set for private capital. Rather than investing directly in procurement, private funds are increasingly positioning around the technology, services and systems that sit adjacent to public spending: software, data, infrastructure, communications and advanced manufacturing. This is where resilience becomes investable and where private capital finds scale. As the opportunity set expands, so does operational complexity, particularly where defence-related exposure drives additional governance, disclosure and investor-specific requirements.

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Why this matters now

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As aerospace, defence and cybersecurity strategies move further into the institutional mainstream, they attract a different kind of scrutiny. Boards, auditors and LP operational due diligence teams ask tougher questions earlier, not because the strategies are controversial, but because operational errors carry greater consequences when sanctions exposure, restricted investors, sensitive data and end-user risk form part of the investment story. In practice, this translates into deeper diligence on ownership and control, investor eligibility and jurisdiction-specific restrictions, alongside the core fund administration questions.

The implication is familiar from other moments of rising complexity in private markets. Just as continuation vehicles work structurally but can strain operating models designed for simpler ownership structures and reporting cadences, defence-adjacent strategies can be straightforward in principle yet unforgiving in execution if governance, controls and disclosure discipline are not institutional from day one.

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What we are seeing in practice

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The investable universe is broader than traditional prime contractors. Much of the growth in interest is concentrated in three overlapping areas.

1. Aerospace and space infrastructure

Capabilities that sit upstream of national resilience agendas, including communications, sensing and mission-critical systems.

2. Cybersecurity and data resilience

Often framed less as a defence allocation and more as critical infrastructure protection, particularly where civilian and public-sector dependency is high.

3. Dual-use technology

Platforms with both civilian and defence applications, expanding the opportunity set while increasing diligence and disclosure complexity.

A common feature across these areas is that operating models are tested earlier. A cyber strategy may be data-heavy with demanding reporting expectations. A defence manufacturing exposure may raise different questions around contracts, procurement cycles and revenue recognition. Both can be compelling. Both can also lose momentum in diligence if controls, governance and information flows are not robust. Defence exposure can also drive more complex entity structures, including jurisdictional holding arrangements and additional SPVs, increasing the burden on governance, reporting and oversight.

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The operational pressure points that surface first

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A common feature across these areas is that operating models are tested earlier. A cyber strategy may be data-heavy with demanding reporting expectations. A defence manufacturing exposure may raise different questions around contracts, procurement cycles and revenue recognition. Both can be compelling. Both can also lose momentum in diligence if controls, governance and information flows are not robust. Defence exposure can also drive more complex entity structures, including jurisdictional holding arrangements and additional SPVs, increasing the burden on governance, reporting and oversight.

In our experience, four areas tend to determine whether these strategies convert market interest into durable institutional capital.

1. Restrictions, screening and compliance architecture

Managers do not need to be defence contractors to face national-security-adjacent requirements. Exposure can arise through customers, suppliers, licences, jurisdictions or end users. LPs increasingly expect clarity on how screening works in practice, how exceptions are handled, and how monitoring is evidenced over time, particularly where different investor groups impose different constraints. This scrutiny is often more granular in defence-adjacent funds, with investor focus on nationality, control, beneficial ownership and information rights. Side letters can become more complex, with tighter drafting around who can receive what information and under what conditions.

Jurisdiction also matters. Funds and structures may be subject to differing restrictions and expectations across the US, the UK and the EU, as well as allied frameworks and policy positions. Managers need a coherent approach that can be evidenced consistently across the fund, its entities and its service provider ecosystem.

2. Valuation traceability and governance

Defence-adjacent assets can involve long-cycle contracts, milestone-based delivery and specialist intellectual property. None of this makes valuation unreliable, but it does raise the importance of a clean audit trail from assumptions through to outputs, supported by contemporaneous documentation so external review becomes confirmation rather than reconstruction. In high-scrutiny strategies, defensibility matters more than elegance.

3. Close discipline and reporting cadence

Timetable drift is remembered. A strategy may be attractive, but a platform that slips quarter-end, rebuilds reporting packs each cycle, or depends on key-person heroics will often face extended diligence. LPs underwrite repeatability as much as track record and they look for evidence that processes survive scale. Where deployment is slower, the operational focus can shift towards disciplined cash forecasting, budgeting and proactive LP communication.

4. Data integrity and controlled disclosure

These strategies frequently demand higher-quality look-through reporting and tighter communications control. Version management, distribution governance and consistent narratives matter, particularly where disclosure sensitivities differ across the investor base. Investor-specific requirements are rarely ‘standard’ in this segment.

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What good looks like

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Managers that build momentum tend to do a small number of things early and keep them consistent. They define the investable boundary with precision, including how dual-use exposure and exclusions are treated. They embed compliance as a workflow rather than a periodic review. They create reporting that can be reproduced without reinvention. They also treat valuation governance as part of the investor trust model, with clear timetables, documented challenge and evidence of input quality.

For Langham Hall, the operational response cannot be limited to NAV processing alone. These strategies increasingly require a more bespoke service approach across entity structures, investor-specific reporting, side letter tracking, controlled disclosure and governance support, with the operational evidence that sophisticated LPs expect to see.

This is not a call for heavy infrastructure. It is a call for fund-grade discipline that removes avoidable friction at the point when LP attention is highest.

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The questions LPs are increasingly asking in 2026

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For managers launching, scaling or reallocating into aerospace, defence or cybersecurity strategies, these questions now surface early in diligence and board oversight:

• Can you evidence a repeatable screening and monitoring process that stands up under sanctions and export control scrutiny?
• Can you demonstrate control and ownership transparency, and show how nationality and information rights are handled across the fund and its entities?
• Can you trace material valuation assumptions to documented inputs, and show when and how they were challenged?
• Can you close on time, quarter after quarter, without bespoke workarounds?
• Can you produce consistent, controlled reporting that reflects restricted investor requirements and avoids multiple versions of the truth?
• If capital deployment is slower, can you evidence robust cash forecasting, budgeting and proactive LP communication, including around fees, liquidity and waterfall mechanics?
  When those answers are clear, the market opportunity becomes easier to capture. When they are not, the result is predictable: extended diligence, timetable drift and momentum lost despite strong thematic demand.

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The outcome

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The most constructive way to frame this moment is not that investors have abandoned impact, but that the definition is maturing. In a world where security and continuity underpin economic stability, resilience is increasingly being treated as a legitimate long-term outcome, and capital is aligning accordingly. For managers, the opportunity is real. The differentiator will be operational credibility: governance, control and reporting that stand up under scrutiny.