A game changer?
Creation of a US sovereign wealth fund will bring both opportunities and risks
Donald Trump expressed interest in establishing a sovereign wealth fund throughout his presidential campaign. On February 3, just two weeks after returning to the White House, he signed an executive order to create the fund.
“We’re going to create a lot of wealth for the fund” he said. “And I think it’s about time that this country had a sovereign wealth fund.” According to Scott Bessent, the treasury secretary, the fund will be “up and running within the next 12 months”.
Sovereign wealth funds are government-owned investment vehicles that allocate capital across a variety of assets, geographies and sectors to generate returns or advance strategic objectives. They serve as financial cushions, investing current fiscal resources to support future expenditures, whether for economic stabilisation, savings for future generations, or aiding a country’s economic transformation.
According to the Sovereign Wealth Fund Institute, there are more than 100 SWFs worldwide. These funds have grown dramatically in recent decades, rising from about US$500 billion of total assets in the 1990s to around $13.7 trillion today. They play a crucial role in generating wealth for the long term.
Trump’s executive order framed a US wealth fund as a tool to “maximise the stewardship of our national wealth for the sole benefit of the American people”, aiming to “promote fiscal sustainability, lessen the burden of taxes on American families and small businesses, establish economic security for future generations, and promote United States’ economic and strategic leadership internationally”.
He directed the Treasury and the Department of Commerce to jointly develop a plan within 90 days, with recommendations for funding mechanisms, investment strategies, fund structure, governance model, and legal considerations.
While the executive order did not specify an initial size or target, Trump suggested during his campaign that it should approach or exceed $2 trillion.
Financing
Wealth funds already exist in several states in the US. According to a fact sheet from the White House, 23 states maintain their own funds, controlling $332 billion of total assets.
States like Alaska, Texas, New Mexico, and Wyoming have established “permanent funds” to finance their education systems and state operations, enabling them to offer low or zero state income taxes. The Alaska Permanent Fund, set up in 1976, is the largest, boasting $82 billion of assets.
In February, the New York Times reported on bipartisan interest to establish a wealth fund at the federal level, with both Trump’s campaign team and former President Joe Biden’s administration proposing similar initiatives last September.
The Democrats framed it as a tool to counter China’s economic influence. “We should consider every potential tool to help ensure the United States remains competitive and meets future challenges,” Democratic Congressman Morgan McGarvey said when he introduced a bill to explore the idea.
Trump’s executive order provided little detail about how the wealth fund would be funded.
Countries such as Norway and Saudi Arabia have financed their wealth funds from the proceeds of natural resources like oil, gas, metals, and minerals. Others, like China and Singapore, have primarily relied on budget surpluses.
But the US government has a massive budget deficit, projected at $1.15 trillion for 2025, with total national debt exceeding $36.2 trillion, so there is limited room to finance a wealth fund.
The White House fact sheet indicates that government assets could be a potential source of funding. It notes that the government directly holds $5.7 trillion of assets, and even more through natural resource reserves and that the “vast sum of highly valued assets” can be invested through a sovereign wealth fund.
Bessent, too, pointed to government assets, including public land, federal buildings, gold and other underutilised resources, that could be leveraged to generate higher returns. “We are going to monetise the asset side of the US balance sheet for the American people,” he said. “We are going to put the assets to work.”
Trump has suggested that part of revenues raised from his tariffs on imports could be allocated to the fund. Others have proposed earmarking proceeds from Trump’s “gold card” scheme directly into the fund. The scheme grants wealthy foreigners US residency and a pathway to citizenship for a fee of $5 million.
The executive order is also vague about the specific activities that the fund would undertake. Trump said last year that it could finance “great national endeavours,” including infrastructure projects such as highways and airports, as well as manufacturing and medical research.
He also indicated when signing the executive order that the wealth fund may consider purchasing a controlling stake in TikTok, the popular video-sharing platform owned by Chinese company ByteDance.
Concerns
A wealth fund could mark a transformative shift in how the US manages its national wealth, sparking debate over its governance, transparency, and potential impact on global markets.
Critics argue that any state-owned investment vehicle must have a focused mandate along with a highly transparent and accountable governance structure in order to be effective. Both are lacking in statements from the US administration.
The Peterson Institute for International Economics has described Trump’s executive order as “a confused solution to an undefined problem,” questioning what specific issues a US wealth fund aims to address.
Concerns about transparency loom large as lack of oversight could lead to conflict of interest and corruption. Ryan Teague Beckwith, editor of the MSNBC newsletter, warned that “the best-case scenario is a political slush fund; the worst case is outright corruption”.
Proponents see the wealth fund as a game changer for US competitiveness. They argue that it can significantly enhance US economic capabilities, particularly in the face of global competition, including the technological race with China. They suggest that instead of managing the nation's balance sheet with a short-term focus, the US should adopt a long-term investment mindset.
A wealth fund could fill gaps where private markets fall short, supporting key policy objectives that might otherwise go unfunded. This includes managing risks in global value chains, acquiring strategic assets, or facilitating energy transformation. It could also invest in sectors that are strategically important, such as defence, transportation and production of critical minerals which the private sector might avoid due to high cost or low return expectations.
Most notably, proponents assert that a wealth fund could serve as a powerful economic and geopolitical instrument to support US foreign policies. Unlike military or aid-based influence, its financial investments could promote developments aligned with US interests, countering China’s Belt and Road Initiative and reinforcing US soft power and global leadership.
A US sovereign wealth fund could fundamentally reshape global investment flows, economic partnerships and geopolitical dynamics, ushering in new complexities beyond the ongoing tariff wars. There are many issues that have to be addressed, but if executed effectively, the fund could indeed prove to be a game changer.
*This article was published in Asia Asset Management’s May 2025 magazine under the same title.
