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US President Donald Trump has given the Departments of the Treasury and Commerce 90 days to come up with a plan to establish a sovereign wealth fund (SWF).
“We’re going to create a lot of wealth for the fund,” Trump told reporters. “And I think it’s about time that this country had a sovereign wealth fund.”
He also suggested that the fund could be used to buy TikTok.
“We’re going to be doing something perhaps with TikTok and perhaps not,” Trump said. “If we make the right deal, we’ll do it. Otherwise, we won’t … We might put that in the sovereign wealth fund.”
Here’s a look at what we know about Trump’s SWF plan.
What is a sovereign wealth fund?
Governments own and use sovereign wealth funds to invest in global assets for long-term growth.
The official definition created by the International Forum of Sovereign Wealth Funds (IFSWF) describes an SWF as being made up of three elements:
- The country’s government, including federal and state governments, owns it.
- The fund includes investments in foreign financial assets.
- The fund makes investments with financial goals in mind, such as in infrastructure and economic development.
According to the IFSWF, the key elements of SWFs do not include public pension funds, which are ultimately owned by the people who are entitled to receive benefits from them, or foreign currency reserves held by a country’s central bank, which are primarily used for monetary stability rather than investment.
An SWF can act as an investment account for the long-term benefit of the nation; a stabilisation tool, providing funds which can be drawn from when the budget requires it; a development tool to support economic policy; or a combination of all three.
Ultimately, they are designed to be a nest egg, allowing current surplus funds to be invested to benefit future generations. Countries which are rich in commodities have traditionally used them to invest profits from sales of oil, natural gas, metals and minerals for the future. According to the IFSWF, some 60 percent of funds come from natural resources revenues.
Unlike pension funds, from which people withdraw money as income to support themselves in retirement, SWFs are supposed to invest for the collective good of a nation.
That could mean funding the construction of an airport, school or infrastructure project. SWFs also often invest in financial products and buy stakes in companies, which can provide long-term economic security and fund government budgets or social programmes.
Where will the money come from to set up a US fund?
Trump has been vague about the size of any US sovereign wealth fund or how it would be funded.
The president’s executive order directs the Commerce and Treasury Departments to include in the plan recommendations for funding mechanisms, investment strategies, fund structure and a governance model.
Treasury Secretary Scott Bessent told reporters the fund would be established within the next 12 months but also did not specify where the money would come from.
“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.”
Stan Veuger, a senior fellow at the American Enterprise Institute, said that the assets Bessent was referring to could include property and even the government’s Bitcoin holdings.
The US has seized at least 215,000 Bitcoins implicated in criminal activity, valued at almost $21bn at current prices, since 2020, according to analysis by crypto firm 21.co. Trump suggested last year that he might have plans for a crypto reserve similar to oil reserves.
Bitcoin holdings “could be the basis of sovereign wealth fund, though, of course, their value is relatively modest”, Veuger told Al Jazeera.
Which other countries have set up SWFs?
According to the IFSWF, more than 90 such funds manage more than $8 trillion in assets worldwide.
The largest fund is Norway’s Government Pension Fund Global, which has $1.74 trillion in assets, followed by the China Investment Corporation, with $1.33 trillion in assets, according to the Sovereign Wealth Fund Institute, a data provider.
Abu Dhabi, Kuwait, Saudi Arabia and Singapore are among other countries with prominent sovereign wealth funds, with assets of between $801bn and $1.06 trillion, the institute said.
Is setting up a SWF a good idea for the US?
Trump is not the first to consider setting up an SWF for the United States.
Former President Joe Biden’s administration was also considering establishing such a fund before Trump’s election in November, according to The New York Times and Financial Times.
And Trump has lauded the idea of setting up the fund, saying it could fund “great national endeavours” such as infrastructure projects including highways and airports, manufacturing and medical research.
Some investors on Wall Street said the news was a surprise and questioned whether it was a good idea, however.
Typically, a SWF is funded from a country’s surplus funds – be that from the sale of natural resources or from under-spending a budget. However, the United States has consistently run budget deficits since 2001. It ran a deficit of $1.8 trillion in the fiscal year for 2024, which was $138bn – 8 percent – more than in the previous year. The creation of a sovereign wealth fund would likely require approval from Congress.
“Creating a sovereign wealth fund suggests that a country has savings that will go up and can be allocated to this,” said Colin Graham, head of multi-asset strategies at Robeco in London. “The economic rules of thumb don’t add up.”
Veuger, from the American Enterprise Institute, said there is also the risk that the fund’s manager could make bad investments with it.
There “is no reason to think a US SWF could consistently beat the market as long as it didn’t use its political power”, he said. “I do not think it is a good idea for the US.”
There is also criticism of SWFs in general. According to a report published by the Carnegie Endowment for International Peace, many SWFs lack transparency, raising concerns about corruption and political interference.
“Without detailed financial and operational information, the door is left wide open for rapacious managers and political elites to misappropriate investment earnings,” said the Sovereign Wealth Funds: Corruption and Other Governance Risks report.
“Not only can this lack of transparency make SWFs susceptible to corrupt uses, but at the macroeconomic level, it also raises the spectre of real destabilisation risks if funds were to fail, be mismanaged, or rapidly withdraw funding from target markets,” it added.
Could the SWF be used to buy TikTok?
Trump has suggested the wealth fund could buy TikTok but no firm plans to do so have been announced. The company’s fate in the US has been uncertain since January 19, when a law requiring its Chinese owner, ByteDance, to sell it on national security grounds or face a ban took effect.
After taking office on January 20, Trump signed an executive order seeking to delay the enforcement of the law by 75 days.
Trump has said he was in talks with multiple people about TikTok’s purchase and would likely have a decision on the app’s future this month. The popular app has about 170 million American users.
