In just a few quick weeks in office, President Donald Trump has already signed over 60 executive orders. One of them has caught our eye: a directive to create a US sovereign wealth fund.
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Since President Donald Trump was inaugurated last month, his administration has rolled out policies at a breakneck pace, some implemented so quickly they were seemingly up and running before the ink dried on the executive order’s signature.
New tariffs on China, with no grace period, were suddenly put in place this month. The Gulf of America was rechristened so quickly the new name already shows up in Google and Apple Maps (the rest of the world still sees the Gulf of Mexico along with the new White House-endorsed name).
All told, five dozen executive orders have been issued in under a month since the inauguration.
One neuropsychologist told Axios that, amid the news deluge, “there is a point at which the human brain just like peters out and says, ‘I can’t keep up.’”
So to keep your brain from petering out this Sunday, we’ll focus on one executive order that’s not going to have an overnight impact, where implementation requires some breathing room as this EO aims to introduce a new major investment fund to financial markets.
We’re talking, of course, about President Trump’s directive to create a US sovereign wealth fund (SWF). On February 3, he asked the heads of the Treasury and Commerce departments to submit a plan to establish America’s own investment vehicle within 90 days.
More than 90 SWFs are already up and running around the world, managing over $8 trillion in assets, the International Forum of Sovereign Wealth Funds says. Other estimates put their assets under management as high as $13 trillion.
Here’s how America might get in on the action and how it could impact markets.
An Era of ‘State Capitalism’
“Donald Trump’s latest executive order to create a US sovereign wealth fund is as audacious as it is controversial,” wrote analysts at data tracker Global SWF earlier this month. “Long dismissive of conventional economic orthodoxy, Trump’s move thrusts America into the state capitalism game, embracing a playbook more commonly associated with oil-rich autocracies and interventionist economies like China.”
While it’s certainly true that resource-rich regimes that tend to be light on Jeffersonian democracy ushered in the modern era of sovereign wealth funds — the 1953 creation of the Kuwait Investment Authority is considered the dawn of the contemporary SWF — the concept is much older than that.
You can even trace it deep in the heart of Texas, where the Texas Permanent School Fund was established in 1854, nine years after the Lone Star State joined the union, with a $2 million seed from the state legislature.
And, yes, that means that sovereign wealth funds — essentially state-owned vehicles that invest in real and financial assets — already exist in the United States, just not at the national level.
Alaska, New Mexico, and Wyoming also have entities that identify as SWFs — and Trump’s order isn’t as MAGA as some would believe. Former President Joe Biden’s administration also considered ordering the creation of a SWF to invest in tech, energy and supply chains.
But the world’s biggest SWFs do still disproportionately come from commodity-fueled autocracy: After democratic Norway’s $1.7 trillion Government Pension fund, the largest state investment vehicle in the world, the next biggest SWFs are the $1.3 trillion China Investment Corporation, Hong Kong’s $1 trillion SAFE Investment Company, the $1 trillion Abu Dhabi Investment Authority, the aforementioned $1 trillion Kuwait Investment Authority, and the $925 billion Saudi Public Investment Fund.
The US — because it is one of the world’s most attractive investment destinations —benefits from their mere existence.
A study on sovereign wealth funds by researchers at Spain’s IE University, published in November, found that America dominated SWF deal volume in 2023, accounting for nearly a third of the sector’s global direct investment (a year earlier, the US accounted for 59%, with both years well above the still world-leading pre-pandemic norm of 22%).
But the home countries of the SWFs, naturally, benefit, too. The Norwegian fund produced an average annualized return of 6.3% from 1998 to 2024. The Saudi PIF had an annualized return of 8.7% from 2017 to 2023. (In case you’re wondering, Alaska’s $80 billion fund has a 10-year average return of 8.1%.)
And so with foreign sovereign wealth funds benefiting from America’s economic might — the Saudi PIF has stakes in everything from video game maker Electronic Arts to Walmart to industrial conglomerate Honeywell; Norway’s fund holds stakes in tech giants including Amazon and Nvidia — US policymakers will have to figure out if there’s a way to get in on the action with the country’s own vehicle.
It’s possible and perhaps likely the US will use its SWF to advance strategic priorities. The model here is the China Investment Corporation — set up with $200 billion in 2007 — which has made massive investments in developing the country’s natural resources, leveraging China’s substantial foreign exchange reserves in the process.
An American fund also could buttress important domestic industries as well: The staff working on a proposal for a SWF during the Biden administration reportedly considered funding emerging technologies and providing capital to companies competing with Chinese rivals.
Meanwhile, Trump’s SWF executive order says the fund in development will promote American “economic and strategic leadership.”
So the question — which should be answered in some form with a proposal in the next 10 weeks — is exactly how will a US sovereign wealth fund get off the ground.
In the most basic sense, SWFs require a seeding from government savings, which have traditionally come from the sale of commodities and other traded goods. That’s why the wealth fund of Norway — an oil-producing titan — sits alongside several Gulf nation funds as world leaders: They seeded their sovereign wealth funds with budget surpluses driven by their vast energy reserves. (Likewise, Alaska’s $80.5 billion sovereign wealth fund, the largest existing US example, is funded by oil and mining revenues, too.)
The problem is the US federal government is $36 trillion in debt. And it ran a $1.8 trillion deficit last year, and this year it’s projected to be $1.9 trillion.
So the question of how comes down to how much can the US spare, and where will it come from?
Taxes, Tariffs or Treasurys
Until Treasury Secretary Scott Bessent and Commerce Secretary nominee Howard Lutnick (who is expected to receive Senate approval in the coming days) reveal their proposal at the end of President Trump’s 90-day deadline for it to arrive on his desk, experts point to several potential ways to fund a SWF, each with its own set of political and economic hurdles.
The first, and most obvious, way a government can raise funds is taxes. But the Trump administration has promised to extend the 2017 tax cuts for corporations and individuals passed during the president’s first term. With Republicans, including the president, vehemently opposed to hiking the tax burden on consumers or companies, that option appears to be off the table.
Trump has suggested revenue made on tariffs of foreign imports could be used to provide financing. While a major source of government revenue in the late 19th and early 20th centuries, tariffs have provided little in modern history: A congressional report last year found that they’ve represented no more than 2% of federal income in the last 70 years, and that last year customs officials collected $77 billion in levies.
He has also, of course, started slapping tariffs on countries. China was first up, with a new 10% levy, followed by forthcoming 25% tariffs planned for all steel and aluminum imports.
There are also the 25% tariffs on Canadian and Mexican goods that Trump threatened to impose at the beginning of the month — they have been paused while US officials haggle with both countries over concerns about border security and drug trafficking.
But those negotiations suggest Trump is open to bargaining, making revenue from tariffs uncertain.
Another avenue would be Treasury bond issuances, but that would instantly add to America’s debt. So would allocating money from the federal budget. Congress would presumably have to approve either of these options, with both subject to the Senate fillibuster. That would make these options politically contentious.
There’s also what might be described as a closet-cleaning approach in which you rediscover what you already own. A White House fact sheet circulated earlier this month said the federal government “directly holds $5.7 trillion in assets” and indirectly holds considerably more, including through natural resource reserves.
Whatever route Bessent and Lutnick advise, they won’t be alone in their pursuit.
The UK’s Labour government announced in the fall that it is developing a new National Wealth Fund to be initially funded by the Treasury and later by “closing loopholes” on windfall taxes on oil and gas firms. India’s National Investment & Infrastructure Fund — backed by the government and global investors including Abu Dhabi’s SWF — acts as a quasi-sovereign fund and the government of Narendra Modi is planning a more traditional SWF that will be created by consolidating shares in publicly listed state-owned companies.
Ireland also kickstarted its own fund in 2023 by requiring the government to invest 0.8% of the country’s nominal GDP from 2024 to 2035.
But the European island nation has the distinct advantage of government surpluses thanks to lax corporate taxes that have made it a global haven for domiciling. If only everyone could be so lucky.
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