Discussion of space investments has been booming as of late, partially due to Donald Trump’s recent victory in the US presidential election and his subsequent appointment of Elon Musk as head of his new Department of Government Efficiency. Between Trump’s founding of the US Space Force in December 2019, and Musk’s role as the founder of privately held space tech firm Space X, the new administration is expected to have a significant impact on space exploration and investment.

According to 2023 research from PwC, venture capital is the leading investment type in space at 66%, with private equity at 8%, corporations at 11%, and 15% percent falling into an ‘other’ bucket.

A May 2024 CFA Institute article predicts that “space will touch everything” to do with the asset management industry. But considering the outsized representation of VC, private equity, and corporations in space investment, what could fixed income investment in outer space look like?

Scott Atkins, Global Co-Head of Restructuring at law firm Norton Rose Fulbright, writes that “outer space activities . . . are very often pursued by start-up firms which require new finance to operate. Likewise, space activities conducted by existing commercial entities require equity and debt finance to fund new activities.” Thus, for corporate credit investors there is clear scope to get involved in financing development in space, both through existing tech or aerospace companies, or newer, dedicated space ventures.

However, Atkins cautions that frameworks for dealing with securities and insolvency in outer space are still immature. Whilst the Space Protocol of the Cape Town Convention on International Interests in Mobile Equipment, first proposed in 2012, would provide a useful starting point for ensuring the rights of creditors in outer space, the protocol has not been ratified by any country. This makes investing in fixed income in space a practically difficult matter.

For sovereign debt investors, the outlook is even murkier. Investing in Martian or lunar sovereign debt would entail systems of extraplanetary governance, which have not yet been developed. In the meantime, however, it is feasible that we could see opportunities emerge in the supranational debt market.

S&P Dow Jones Indexes define supranational bonds as “those issued by entities formed by two or more central governments to promote economic development for the member countries.” Although currently improbable that the nations most active in outer space—the US, China, and Russia—would team up in such a manner due to ongoing geopolitical tensions, it is conceivable that an “International Space Development Bank” could be formed and subsequently become accessible to investors.

Adam Janikowski, who holds a PhD in Economics and Space Resources, suggests “an International Space Development Bank that would be structured, owned, and governed in a manner similar to analogous terrestrial multilateral development banks, but with a focused mandate to fund space- and space resource-related development projects.” Thus, through the issuance of supranational debt, investment into the proposed ISDB could function in a largely similar manner to existing Earth-based multilateral development banks, such as the European Bank for Reconstruction and Development.

The UK specifically is a thriving destination for private investment in space (second only to the US), yet law firm Foot Anstey notes that many UK start-ups have faced difficulties in securing investment.

If the potential innovation and economic benefits are to be realised, the investment case for these businesses needs to be effectively communicated to investors. Perhaps then we will see fixed income investors pioneering new ways of financing business in outer space.