Key Takeaways
- President Donald Trump has ordered his top financial advisors to establish a sovereign wealth fund and provide details in 90 days.
- A U.S. sovereign fund would be unusual: countries usually establish funds to invest in budget surpluses, but the U.S. runs a large deficit instead.
- Important details about the fund, such as where the money would come from, how it would be invested, and how it would be safeguarded against corruption, were all unknown.
Should the U.S. create a sovereign wealth fund in line with President Donald Trump’s executive order this week, it would be an unusual one among those already established by other countries.Â
On Monday, President Donald Trump ordered his administration to make plans for a sovereign wealth fund. Such funds are common throughout the world—though the largest ones are run by countries whose governments are wealthy from selling resources and run large budget surpluses, namely, Norway and Saudi Arabia. The U.S., by contrast, operates on a spending deficit and has a $36 trillion national debt.
Treasury Secretary Scott Bessent said at an Oval Office ceremony Monday that the fund will be created within 12 months.
“I think in a short period of time, we’d have one of the biggest funds,” Trump said at the signing of the executive order.
The largest fund in the world, Norway’s government pension fund, is worth $1.7 trillion, according to the Sovereign Wealth Institute, an organization that tracks state-owned investment funds.
Where Would The Money Come From?
Details about Trump’s proposed fund remained unclear, including where the money would come from. During the presidential campaign, Trump suggested a fund could be established with money “taken in through tariffs and other intelligent things.”
Bessent said the fund would “monetize the asset side of the U.S. balance sheet,” without specifying what assets he was referring to, or how they would be monetized. The government’s assets include trillions in cash, student loans owed to it, buildings, equipment, and land, including mineral rights.
How Would It Be Invested?
Other major questions included what the fund would invest in, and how it would be used.
At the signing ceremony, Trump suggested the fund could be used to invest in TikTok, the Chinese-owned social media platform. A law passed in December orders the site to be shut down in the U.S. unless its owner, ByteDance, sells it off. On Inauguration Day, Trump signed an executive order delaying the ban until April.
Howard Lutnick, Trump’s nominee to head the Department of Commerce, suggested the government could use the fund to invest in vaccine manufacturers.
“If we are going to buy 2 billion COVID vaccines, maybe we should have some warrants and some equity in these companies,” Lutnick said.
The fund would be used to “build extraordinary national development projects and everything from highways to airports to Transportation infrastructure” as well as “state-of-the-art manufacturing, hubs, advanced defense capabilities” and “cutting edge medical research,” Trump said in September at a speech at the Economic Club of New York.
Although the U.S. government does not have a sovereign wealth fund, the state of Alaska does, funded by revenue from taxing the extraction of oil and other natural resources. Every year, the state sends checks to Alaska residents. Last year, everyone got $1,702.
Funds Pose Corruption Risk
On the other hand, establishing a sovereign wealth fund could also pose some risks, given the enormous potential for corruption and conflicts of interest, as has happened with some foreign sovereign wealth funds.
For instance, between 2009 and 2015, high-ranking officials associated with Malaysia’s sovereign wealth fund misappropriated $4.5 billion, including sending $1 billion to the then-prime minister’s personal bank account, according to a Department of Justice complaint.
What kind of safeguards the fund would have against corruption and conflicts of interest also remained unclear. Trump’s order gave Lutnick and Bessent, both of whom are billionaires who made fortunes on Wall Street, 90 days to provide details of the plan.