Trump wants a US sovereign wealth fund. Here's what that could mean.
Jim WATSON / AFP
- The president has tasked his Cabinet with coming up with a plan for a sovereign wealth fund.
- Such funds have grown enormously and usually manage surpluses, while the US runs a huge deficit.
- Still, Trump's order refers to trillions in existing national assets —a potentially telling signal.
Let's compare two countries. One is known for splashy investments in electric cars, videogame makers, sports franchises, and a mercurial technology investor known for eyebrow-raising proclamations and stunts, including threatening self-immolation.
The other garners few headlines, primarily putting its money to work in sleepier stocks and bonds.
These are two of of the largest sovereign wealth funds in the world: Saudi Arabia's Public Investment Fund and Norway's Norges Bank Investment Management. Both are commissioned to invest and diversify a nation's oil riches for future prosperity. But they are about as similar as shawarma and lutefisk.
How would a US sovereign wealth fund be managed?
On Monday, President Donald Trump issued an executive order tasking his Treasury and Commerce departments with coming up with a plan for our own US sovereign wealth fund. Trump's latest edict since taking over the White House two weeks ago may seem dull compared with initiatives to ramp up deportations, dismantle DEI, and pull back on foreign aid.
Nonetheless, it has prompted furious debate and questions. For starters: What is a sovereign wealth fund?
Most Americans are more familiar with public pension funds, which invest the retirement savings for millions of teachers and other city, county, and state employees.
Sovereign wealth funds are similar, but they invest on behalf of an entire country. And whereas pensions invest money that needs to be repaid in the future — employee retirement savings — sovereign wealth funds tend to have a surplus of money stemming from a natural resource, commonly oil but also diamonds or even so-called "golden passports."
They may fund government services, direct payments to citizens, a rainy-day fund, or specific infrastructure projects. A version can be found in oil-rich Alaska, where its $80 billion sovereign wealth fund pays an annual dividend to residents, shelling out more than $900 million in 2024.
The term was only coined in 2005, and the definitions can be blurry. Estimates vary, but sovereign wealth funds have grown enormously influential in the two decades since — from a couple dozen funds worth roughly $1 trillion in assets to a couple hundred worth as much as $13 trillion in 2024.
At its most basic, it's a diversification play, one of the most simple yet powerful concepts in finance: having bets spread across an array of truly different investments insulates you from shocks and promotes better long-term returns.
Where the money comes from and what it's invested in depends on the country. A small fund with a few billion dollars may invest in venture capital, but that type of investment doesn't move the needle for funds with hundreds of billions, which may lean toward private equity or infrastructure projects — toll roads, energy, data centers — with 10- to 15-year time horizons.
Large funds don't need to generate enormous annual returns to have an impact. Low single-digit returns that beat inflation are often the goal, according to Brian Payne, chief strategist for private markets and alternatives at BCA Research.
"Return percentages are going to be lower, but the amount of money compounding can be enormous and quite influential," said Payne, whose clients include pensions and sovereign wealth funds. A 5% return doesn't move the needle for most individuals or Wall Street investment firms. But for a $100 billion sovereign wealth fund, that's a not insignificant $5 billion.
A key line signals why it could be realistic despite US deficits
Critics of a US sovereign wealth fund point out that the US, far from having a surplus, runs trillion-dollar deficits — the opposite of the world's largest SWFs. Absent a surplus, the money could come from debt or raising taxes or redirecting funds from elsewhere — all of which would require congressional approval.
Trump's order is light on details. It is in effect an order to Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, two Wall Street titans, to come up with the details in the next 90 days: how it will be funded and governed and what it will invest in. With those essential components as yet a mystery, it's hard to judge the prudence and prospects of such an effort.
But even absent a surplus, a US sovereign wealth fund could be realistic — and successful — without increasing debt or raising taxes.
James Broughel, a senior fellow at the Competitive Enterprise Institute, a nonprofit that advocates for deregulation, pointed out that the fact sheet accompanying the executive order alludes to $5.7 trillion in existing assets. The US, for instance, is the nation's largest landowner with nearly 30% of the acreage.
"A lot of the worries seem to be related to the idea that it might increase the national debt or this might lead to more borrowing and fiscal instability," Broughel said. "The fact that they seem to be focused on existing assets that the federal government controls — I view that as a positive development."
Buying stakes in companies like Tik Tok and other such investments would likely require legislation, but changing how you manage existing assets — tapping natural resources and housing data centers on federal land, for instance — likely wouldn't.
"The US does have considerable natural resource wealth," Broughel said, noting that we're now the largest oil producer in the world. He added, "There is a case to be made that we should take better care of the assets we have and be better stewards for maintaining their value over time and preserving them for future generations."
Sovereign wealth funds can be as boring or interesting as the people and countries putting them to work. Trump, while polarizing, is rarely accused of being boring.
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