Luxembourg’s sovereign wealth fund, the Fonds souverain intergénérationnel du Luxembourg (FSIL), will channel up to €112m into private markets to stimulate innovation in the technology and defence sectors and support the domestic housing market, according to a report by the Luxembourg Times.

The move marks a strategic shift for FSIL, which previously held no private market assets. Under its updated policy, up to 10% of the fund’s €745m portfolio will be invested in private equity and up to 4% in real estate, according to Finance Minister Gilles Roth.

A finance ministry spokesperson said the private equity allocation will “focus on the tech and defence sectors,” while real estate investments will be “aimed at supporting the Luxembourg housing market.” The transition will be implemented gradually, with no fixed target date, as FSIL identifies suitable opportunities.

With annual government injections of €62m and expected investment returns, FSIL aims to reach €1bn in assets under management by 2030. Following the reallocation, equities and bonds will continue to represent around 82% of the portfolio, with the fund maintaining its ESG and socially responsible investment standards.

Stephane Pesch, CEO of the Luxembourg Private Equity and Venture Capital Association (LPEA), said the new allocation “will not only strengthen the local funds sector but also reinforce Luxembourg’s role as a hub for alternative investment management in Europe.” He added that while the 14% allocation is “a strong start,” exposure to private assets could rise as the fund matures.

The fund’s expansion into private equity follows a global trend among sovereign wealth funds seeking higher returns through alternative investments. FSIL’s move comes amid increased European momentum for pension funds and public institutions to boost exposure to private markets, particularly in support of long-term industrial and sustainability goals.

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