[UNITED STATES] In a striking move, former President Donald Trump has proposed the idea of creating a US sovereign wealth fund. On February 5, 2025, Trump issued an executive order instructing his Treasury and Commerce departments to craft a plan for establishing a fund designed to invest the nation’s resources for future prosperity. While this may sound like an ambitious yet dull governmental task, it has sparked intense discussions and potential ramifications for the country’s economy.
In this article, we’ll explore what a sovereign wealth fund (SWF) is, how it works, its benefits, and what the proposal could mean for the US. We’ll also compare the US's potential SWF to the funds in countries like Saudi Arabia and Norway, which are often cited as models for such an initiative.
A sovereign wealth fund is a state-owned investment fund that manages the wealth generated by the country’s surplus resources, most commonly natural resources like oil, gas, and even minerals. Unlike pension funds, which manage assets for public workers’ retirements, SWFs manage capital on behalf of an entire country. These funds are used for a variety of purposes: from boosting national savings and managing fiscal surpluses to diversifying investment portfolios in various sectors such as infrastructure, private equity, and other high-yielding assets.
SWFs have become a significant global financial force in recent decades. From a handful of funds worth a few billion dollars in the early 2000s, there are now over 200 sovereign wealth funds globally, holding assets estimated to total around $13 trillion in 2024, according to Reuters.
Countries like Saudi Arabia and Norway have long been known for their successful sovereign wealth funds. Norway's Government Pension Fund Global, also known as the Oil Fund, has amassed over $1 trillion in assets since its establishment in 1990. Saudi Arabia’s Public Investment Fund (PIF), a prominent SWF, has significantly contributed to its country’s economic diversification efforts, with investments in technology, entertainment, and infrastructure projects.
For Trump, the idea of a US sovereign wealth fund represents a bold step towards bolstering national finances and securing long-term growth, especially as the country grapples with high national debt and fiscal challenges.
Trump’s Proposal for a US Sovereign Wealth Fund
In his executive order, President Trump has tasked his Cabinet to come up with a plan to establish a US sovereign wealth fund. This fund would presumably leverage the country's existing natural resources and other national assets, such as infrastructure, to generate long-term wealth for the nation.
This plan could be transformative in the face of the nation’s large deficit and growing debt. Trump's order refers to trillions in existing national assets — a potentially telling signal. Trump’s proposal emphasizes the need to invest in various sectors, from infrastructure to technology, in order to diversify the nation’s wealth, much like Norway has done with its oil reserves.
Trump’s administration had long been focused on policies designed to reduce America’s reliance on foreign investments. Now, with this proposed sovereign wealth fund, the US could look inward for future prosperity by capitalizing on its domestic resources.
Could the US Benefit from a Sovereign Wealth Fund?
The idea of a sovereign wealth fund in the US is not entirely new. Some states, like Alaska, already have their own sovereign wealth fund, which pays dividends to residents. Alaska’s Permanent Fund, for example, is valued at $80 billion and distributed over $900 million in dividends to its residents in 2024. The proposal for a national fund, however, would be much larger and serve a broader purpose: long-term stability for the national economy, providing revenue for infrastructure projects, stabilizing the economy during downturns, and even possibly funding public services.
There are clear benefits to establishing a sovereign wealth fund, but the challenges are significant, especially considering the United States’ current fiscal status. The US government operates with a deficit, so the fund would likely need to start by tapping into existing national assets, potentially including natural resources, infrastructure, and other valuable holdings.
The most immediate benefit of an SWF would be its ability to provide a financial cushion during times of economic hardship. It would function as a rainy-day fund, ensuring that the country has sufficient resources to weather financial crises without resorting to debt.
“Return percentages are going to be lower, but the amount of money compounding can be enormous and quite influential,” said Brian Payne, the chief strategist for private markets and alternatives at BCA Research. He pointed out that for large funds, even modest returns can lead to substantial long-term growth, a key benefit for the US in managing its fiscal future.
Additionally, a sovereign wealth fund could provide a hedge against economic volatility by diversifying the nation’s investments in sectors beyond its domestic economy. This would reduce the reliance on specific industries or economic policies that may be vulnerable to external shocks.
Comparing the US’s Potential SWF to Norway and Saudi Arabia
The US has the potential to create one of the largest sovereign wealth funds globally, given its vast resources and economy. However, its approach may differ from those of Norway and Saudi Arabia, both of which have been at the forefront of sovereign wealth fund management.
Norway’s SWF, the Government Pension Fund Global, is known for its conservative investment strategy, focusing heavily on bonds, stocks, and real estate. This focus on stable, low-risk assets has allowed the fund to grow steadily, generating a long-term return that supports the country’s welfare state. As of 2024, the fund’s assets are over $1 trillion, and its investments span a range of industries and geographical regions.
Saudi Arabia, on the other hand, has taken a more aggressive approach with its Public Investment Fund (PIF). The PIF has become a key player in global markets, making high-profile investments in technology, entertainment, and other industries. The PIF has also played a crucial role in Saudi Arabia’s Vision 2030, which aims to diversify the nation’s economy away from oil dependence. The fund’s assets have ballooned, with investments in companies like Lucid Motors and SoftBank’s Vision Fund, which makes it one of the most dynamic sovereign wealth funds in the world.
While the US may share some similarities with these countries, the nation’s SWF would likely have its own unique characteristics. The scale of the US economy and its reliance on both public and private assets could mean that its SWF would span across a wide array of sectors, from infrastructure and technology to health and education.
Potential Risks and Challenges
Despite the potential benefits, establishing a US sovereign wealth fund also poses significant risks and challenges. The main obstacle is, of course, funding. As the US operates with a considerable fiscal deficit, building a sovereign wealth fund would require substantial initial capital, which might require tapping into federal reserves or other national assets.
Another challenge lies in the management of the fund. Who will be responsible for overseeing the SWF’s investments? Will it be run by a centralized body, or will states and local governments have a say in how the funds are allocated? These are questions that remain to be answered, and the success of the fund will depend on the level of expertise and transparency involved in its management.
Additionally, there’s the question of political interference. In countries like Norway and Saudi Arabia, sovereign wealth funds are often insulated from political pressures, allowing for long-term, stable decision-making. In the US, however, the political climate is notoriously volatile, and the management of a national fund could face partisan influence, which might hinder its ability to remain independent and focused on long-term goals.
The proposal for a US sovereign wealth fund, as put forth by former President Trump, is an ambitious step toward securing the nation’s economic future. By diversifying investments, stabilizing the economy, and creating long-term wealth, such a fund could significantly benefit the country. However, it’s important to recognize the challenges involved, from financing to governance and political interference. As the world watches how this proposal unfolds, it will be fascinating to see how the US can navigate these hurdles and possibly create a sovereign wealth fund that could rival the success of those in Saudi Arabia and Norway.
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