KEY TAKEAWAYS
- On Monday, President Donald Trump signed an executive order to establish a sovereign wealth fund.
- A sovereign wealth fund is a state-owned investment fund that puts federal dollars into income-generating assets to help diversify their economies.
- Norway has the biggest sovereign wealth fund in the world, which invests in its country’s oil and gas revenues and stock in foreign countries to fund part of its government budget.
- Other large sovereign wealth funds in the United Arab Emirates, Saudi Arabia, and China.
On Monday, President Donald Trump signed an executive order that laid the groundwork for setting up a sovereign wealth fund over the next 12 months.
Sovereign wealth funds are essentially state-owned investment funds that put federal dollars into income-generating assets. Most countries with such funds depend heavily on resource extraction, and income the fund generates helps diversify their economies.
The Trump administration did not share many details on how the fund would be set up or where the money for it will come from. Although the U.S. economy is one of the largest and most diverse in the world, it is also running a deficit.
“Other countries have sovereign wealth funds,” Trump said. “They’re much smaller countries, and they’re not the United States; we have tremendous potential in this country.”
Here are some notable examples of other countries with a sovereign wealth fund and how they use them.
Norway
Norway has a $1.7 trillion sovereign wealth fund and is the largest in the world. It invests the country’s oil and gas revenues in financial markets, including stock in foreign companies. About a fifth of the government’s budget is funded by the income from the sovereign wealth fund.
China
China has a $1.3 trillion sovereign wealth fund. It invests in the urbanization of Africa, the Belt and Road initiative, and global energy markets, including many foreign renewable energy assets. The fund is used to pay for part of the government’s budget.
United Arab Emirates
Abu Dhabi, United Arab Emirates, has a $1 trillion sovereign wealth fund. It does not disclose its specific investments but has said it invests in broad asset categories such as indexed funds, internal, external, and private equities, fixed Income, and treasury, among others.
Saudi Arabia
Saudi Arabia has a $925 billion sovereign wealth fund. It invests in public and private Saudi companies as well as international investments. The fund supports commercial projects such as petroleum refineries and industries, pipelines and storage, transportation, energy, and other projects that are significant to the Saudi Arabian economy.
Correction, Feb. 5, 2024: A previous version of this story misidentified the amount of the federal deficit.