A Pentagon Sovereign Wealth Fund?
Semafor reported last week that the Pentagon is recruiting from Goldman Sachs, JPMorgan, and other prominent Wall Street players to staff “investment teams” at its new Economic Defense Unit (EDU). Available information points to an investment apparatus being created within the Pentagon, staffed by financiers connected to the same private-equity world that stands to benefit from it.
It sounds like another attempt by the administration to construct a pseudo-sovereign wealth fund controlled by the executive branch.
The EDU is a recent administrative creation of the Department of Defense (DoD) to work alongside the DoD’s Office of Strategic Capital (OSC). Created by the National Defense Authorization Act for Fiscal Year 2024, the OSC is authorized by statute to make credit-based investments to support industries important to national security. There’s no clear statutory authority for obtaining equity stakes in private companies. Still, the Trump administration has already gone down this road, and the Republican-majority Congress remains missing in action.
Screenshots from a pitch deck prepared by Heidrick & Struggles, a longstanding Beltway executive-search firm, promise recruits “unmatched access to top-level government officials and privileged information flow,” access to fundraising channels that include “royal families and foreign service contracts,” and “exceptional” exit opportunities, including potentially launching a new fund with members of the team. It could even be “the launchpad to starting your own firm.”
If that’s not bad enough, the cast of characters involved in the Pentagon pitch should raise even more eyebrows. According to the New York Times, Deputy Defense Secretary Stephen Feinberg is in charge of “overhauling” the OSC and overseeing the EDU. Billionaire Feinberg co-founded Cerberus Capital Management ($65 billion in assets under management) and has been a major Trump donor. The investment teams would report to David Lorch and George Kollitides, both of whom had worked at Cerberus.
The Times also reported that the Pentagon investment teams would focus on undersea cables, mineral extraction and refining, strategic logistics, munitions, drones, satellites, and energy generation. Cerberus appears to have active ties to several of the same sectors the EDU will reportedly target. The firm remains involved in undersea cables through SubCom, in critical minerals through Torngat Metals, in aviation support and logistics through M1 Support Services, and in aerospace through North Wind and Stratolaunch. Cerberus is also tied to Red River, a defense-focused technology contractor, and has a critical minerals and battery materials investment unit.
The pitch deck tells recruits they’ll “be part of a team deploying $200 billion over three years—more capital than most investors deploy in their entire careers.” It isn’t clear where that $200 billion is coming from, but then this administration excels at creating questions and not providing clear answers. Strangely, it may take Democratic control of Congress to uncover more of the details behind a Republican administration’s barrage of market-distorting schemes.