President Donald Trump recently signed an executive order proposing the creation of a US sovereign wealth fund.
The idea is simple. Like Norway and Saudi Arabia, they use government assets to generate returns.
But the US is not sitting in a pile of surplus oil and trade reserves. So, how exactly does this work? And more importantly, should it be?
What is a Sovereign Wealth Fund and why does Trump want it?
A sovereign wealth fund (SWF) is a government-run investment vehicle that holds stocks, bonds, real estate or goods. The goal is to turn state-managed assets into long-term financial benefits.
Countries with large natural resource reserves are investing in global assets using vehicles such as SWFs.
The biggest examples are Norway, with a $1.7 trillion fund, and Saudi Arabia, with a $900 billion fund.
Even small countries like Singapore (a total of $2.1 trillion between GIC and Temasek) have built up large funding.
Trump’s motivation is clear. He wants the US to generate wealth from existing assets rather than simply relying on taxes and liabilities. In his words:
“It was when the country had a sovereign wealth fund.”
He even suggests that the fund could be used to buy Tiktok, although the details are still vague.
This is not a new idea. The Biden administration has also looked into similar funds investing in critical minerals, defense and infrastructure.
But the president has never pulled the trigger. But Trump is known for his aggressive deals, so he’ll want to change it.
Where does the money come from?
The biggest challenge for US sovereign wealth funds is funding. Norway and Saudi Arabia have made theirs thanks to their abundant oil reserves.
China and Singapore did that through their massive trade surplus.
But the problem with the US is that it has a budget deficit of $1.8 trillion and a national debt of $36 trillion.
Trump came up with some ideas. One is the monetization of federal assets, totaling $5.7 trillion.
A federal building costs $1.2 trillion. Many of them are not fully used. Student loan assets are $2 trillion, but much of them can be amortized.
He also proposes tariffs as a source of income. The idea is to concentrate money from import duties on the fund rather than using it immediately.
Another possibility is that foreign companies like Tiktok require the US government to grant an interest in exchange for domestic activities.
None of these are simple solutions. It’s not easy to sell government buildings.
Student loans generate no immediate cash flow. Tariffs are advantageous, but unpredictable and can lead to trade wars.
Does this actually work?
If the US successfully builds SWF, it could be the biggest in the world overnight. The size of government-owned assets is warping even today’s largest sovereign funds.
The state-level example shows that this can be done. The Alaska Permanent Fund ($8 billion) is funded through oil revenues and sends payments directly to residents.
North Dakota Legacy Fund ($11.5 billion) will reinvest future oil and gas taxes.
The federal version can do the same nationwide, allowing infrastructure funding, debt reductions, or even direct cash payments to Americans.
Some analysts have proposed using it to back a Universal Basic Income (UBI) program similar to what Alaska is doing.
But there’s a catch. SWF works best when it is created from excess capital rather than borrowed money.
The US will need to redistribut the existing assets or find new revenue streams. If not managed well, the fund could become another political mud fund rather than a serious investment vehicle.
What is the risk?
The idea of a $6 trillion investment fund sounds good, but it’s all about doing it. The biggest risks are political interference, poor investment decisions and lack of oversight.
Many sovereign wealth funds operate independently to avoid political influence. Norwegian funds, for example, are run by professional managers who follow strict rules to avoid risky bets.
However, the US Fund is deeply connected to Washington. When a politician starts using it for pet projects, relief, or politically motivated investments, it can become liable instead of the assets.
There is also the risk that the government will choose winners and losers. If the US government begins to buy stocks in private companies, it raises ethical and legal concerns.
Do taxpayers want to invest their money in controversial high-tech companies like Tiktok? What about fossil fuels? Big Pharma? A strategic reserve for Bitcoin?
Next is the global response. Countries with existing SWFs, such as China and Saudi Arabia, are using them as strategic vehicles by investing in industries that have geopolitical impacts.
If the US is following the lawsuit, can this cause an investment war between nations?
Bold ideas with an uncertain future
Trump’s sovereign wealth fund proposals are ambitious, unconventional and risky.
If well constructed, it could become a powerful financial tool to help America manage its wealth more effectively.
If it’s wrong, it could be another source of government waste and mismanagement.
The next 90 days are important. Treasury and Commerce officials must outline a clear plan that addresses how the fund is raised, who will oversee it, and what its long-term investment strategy is.
If done correctly, this could be one of the biggest financial moves in US history. If you’re wrong, it could just be another political story point that fades away.
