United States President Donald Trump has given the green light for the creation of a sovereign wealth fund (SWF) for the U.S., which based on statements he made last September, could exceed US$2 trillion.
While it remains unclear how such a wealth fund would work, a SWF would place the U.S. alongside numerous other countries globally that make direct investments using government money for the collective good of a nation.
SWF funds allow a government’s budget surplus to create a nest egg that can be deployed to benefit future generations. One example is Australia’s $230 billion Future Fund which invests in disaster and drought relief, public housing and disability care.
IDFC could morph into US SWF
While Trump first floated the idea of a sovereign fund as a presidential candidate, he is yet to provide any details beyond claiming that a SWF could fund “great national endeavours” like infrastructure projects such as highways and airports, manufacturing, and medical research.
“We’re going to create a lot of wealth for the fund… and I think it’s about time that this country had a sovereign wealth fund,” Trump told reporters.
Typically, SWFs rely on a country’s budget surplus to make investments, however with the U.S. operating at a deficit Trump has already hinted that a U.S. SFW could be funded by “tariffs and other intelligent things”.
The Trump administration is understood to have spit-balled the idea of converting the U.S. International Development Finance Corp (IDFC) – which partners with private parties to finance projects in the developing world - into a sovereign wealth fund.
Last week Trump nominated Benjamin Black managing partner at investment firm Fortinbras Enterprises to head that development agency.
Monetise the US balance sheet
Subject to Congress approval, Treasury Secretary Scott Bessent expects the fund to be established within 12 months.
“We’re going to monetise the asset side of the US balance sheet for the American people,” Bessent said.
“There’ll be a combination of liquid assets, assets that we have in this country as we work to bring them out for the American people.”
Beyond public works and infrastructure, SWFs also invest in financial products and buy stakes in companies, which can provide future funding for government budgets or social programs.
According to the International Forum of Sovereign Wealth Funds (IFSWF), there are over 90 sovereign wealth funds globally managing over $8 trillion in assets.
IFSWF data also suggests around 60% of SWFs are funded by natural resources revenue.
The largest SWF is Norway's Government Pension Fund Global with $1.74 trillion in assets, followed by China Investment Corporation with $1.33 trillion in assets.
Numerous U.S. states, including Alaska, Texas and New Mexico also have their own wealth funds, which help fund various priorities, including education and tax relief. They frequently rely on revenue raised from natural resources, like oil or land.
