Defence launches Advanced Capabilities Investment Fund

Defence is seeking co-funding proposals of up to $500 million from the private capital market to invest in Australian businesses developing advanced defence and dual‑use capabilities. Depending on the finance industries’ responses Defence may co-invest on a dollar-matching basis, meaning there could be up to $1 billion available.

The closing date for submissions is 30 April. An online industry briefing will be held on 12 March from 1530 to 1630 Canberra time.

Defence has said it has made no decision as yet on whether to go ahead with the idea, but if it does this will be under a new construct: Advanced Capabilities Investment (ACI) Funds – and there could be more than one – will be designed to invest in Australian Small and Medium Enterprises (SMEs) to support the development of kinetic and kinetic-enhancing advanced defence capabilities.

The Request for Expressions of Interest is now open on AusTender and is intended to identify one or more suitable private capital partners to potentially manage the investment. The decision to invest and final terms will be determined in partnership with the successful fund manager/s and subject to further Government consideration, says Defence.

The Advanced Capabilities Investment Fund “will target the advanced capabilities and exports of tomorrow such as cyber, artificial intelligence and autonomy, electronic warfare, quantum technologies, and undersea warfare,” said Pat Conroy, Minister for Defence Industry.

“Under the proposal, there would be a path to funding defence projects with private capital – and I know there is demand from the financial sector for this – in concert with public funds,” he told the ADM Congress in Canberra. Investing in advanced capabilities that have export potential helps build a bigger defence industry and supply chain, that’s more resilient and better for local businesses, he added.

“(The new fund) will catalyse growth of Australia’s innovation ecosystem, sovereign industry capability and export potential. This comes direct from the National Defence Strategy and the Defence Industry Development Strategy – to work with private capital to support defence industry – with the Government considering investing up to $500 million in a co-contribution model.

“So, that’s potentially a $1 billion fund.”

In the current environment, we have to be innovative, Conroy said. “This fund demonstrates that the Albanese Government is prepared to think outside the square. If we keep just doing things the same old way, we will be left behind.

“This is about a robust and thriving defence industrial base.”

Australia’s current strategic environment tells us that we need to do all we can to drive investment in new capabilities, added Conroy.

Joint investment between the government and private sector has enormous potential to further unlock Australian jobs and innovation, says Defence. In developing potential options for co-investment, the government is looking for ways to catalyse growth of Australia’s innovation ecosystem, sovereign industry capability and export potential.

Once selected by Defence, the successful firm or firms will work with Government to develop the investment proposal further for the Government’s consideration.

This initiative reflects the Government’s commitment, as outlined in the 2024 Defence Industry Development Strategy, to work with venture capital fund managers and other investors to explore opportunities for private capital investment in Australian businesses developing critical defence capabilities.