President Trump has announced plans for establishing US Sovereign Wealth Fund. United States does not have a traditional sovereign wealth fund (SWF) akin to those in countries like Norway (The Government Pension Fund of Norway), Saudi Arabia (Public Investment Fund), or Singapore (GIC and Temasek Holdings).
This will be a state-owned investment fund composed of assets and investment structure that will be structured in the coming days by US Government. Generally, fund structure are composed of financial assets such as stocks, bonds, real estate, Crypto or other financial instruments.
President Trump has hinted that US Sovereign Wealth Fund can buy TikTok which is owned by ByteDance which is a Chinese tech company.
It remains to be seen whether US SWF can be used to exert influence like how China uses its state-backed funds. For instance, just as China’s CIC has stakes in various global companies, a US SWF might seek to gain controlling or significant stakes in strategic assets or companies, particularly those with operations in or ties to China, to influence trade, technology, or geopolitical strategies. With China’s CIC and other state-owned enterprises making significant investments globally, including in the US, a US SWF could theoretically be used to counterbalance Chinese economic influence. This might include investing in sectors where China has made strategic inroads, like technology, renewable energy, or infrastructure, to ensure US strategic interests are not compromised.
The China Investment Corporation (CIC) is one of the largest sovereign wealth funds in the world, established to diversify China’s foreign exchange reserves and to seek maximum returns within acceptable risk levels. It was created to manage a portion of China’s foreign exchange reserves, investing in both domestic and international markets to achieve higher returns than traditional government bonds and to support China’s economic strategy. CIC invests in a wide range of asset classes including equities, fixed-income securities, alternative investments like hedge funds, private equity, real estate, and infrastructure. CIC has significant investments in the US, Europe, and Asia, with a focus on sectors like technology, energy, and finance. Historically, CIC has made notable investments in companies like Blackstone, Morgan Stanley, and various real estate assets globally. The fund has also been part of China’s strategy to internationalize the yuan and support the Belt and Road Initiative through investments in infrastructure.
CIC operates under the oversight of the State Council of China and have been questioned for transparency due to its role and reach in enhancing the influence of China’s foreign policies. CIC has faced scrutiny regarding its investment transparency, the influence of Chinese government policy on its decisions, and concerns about national security in host countries where it invests.
There’s been increasing scrutiny from the US on foreign investments, especially those with ties to China, for national security reasons. A US SWF could be part of a broader strategy to strengthen domestic industries critical to national security, where Chinese investments have been restricted or scrutinized.
Funding of US Sovereign Wealth Fund remains a big question. Who and how it will be funded, especially when US is running under unsustainable level of debts will remain a question of concern. Creating and managing such a fund would require significant political will, legislative action, and economic strategy. The US has historically run budget deficits, which could complicate funding such a venture without affecting fiscal policy. The fund could potentially be partially financed by global tariffs. This could serve a dual purpose, for reducing trade deficits with other cuntries and funding a mechanism that might invest in competing sectors or technologies, thus challenging economic and technological expansion of its adversaries.
Beside the geopolitical influence, US is aware of economic success of such structures and how fund income can be used for the welfare of citizens, especially when Global Sovereign Wealth funds are benefitting from investment inside United States and acquiring stakes in US tech companies. In 2024 Norway Pension Fund earned $224 billion (2511 billion Kroner) from its fund. Fund has investment in US Technology stocks, which performed phenomenally well in 2024. Norway’s Government Pension Fund Global is recognized as the world’s largest sovereign wealth fund. This fund, managed by Norges Bank Investment Management, was reported to have surpassed $1.4 trillion in assets. It was established to invest the surplus revenues from Norway’s petroleum sector, aiming to manage these for future generations and to diversify investments globally. Funds have assets over $1.4 trillion. Originally set up to manage the wealth from oil and gas, it now also serves to provide stability for the Norwegian economy beyond the era of fossil fuel dependency.
Proposition is not new for United States. Instead of a single and large SWF, the U.S. has various government managed investment vehicles and funds with t similar functions but different structures. Social Security Trust Funds is one such example. While not a SWF in the traditional sense, these funds manage investments from social security contributions but are primarily for future payouts to beneficiaries. Federal Retirement Thrift Investment Board (FRTIB) manages the Thrift Savings Plan. Exchange Stabilization Fund (ESF) managed by the U.S. Department of the Treasury can be used for various stabilization activities, including currency interventions, but it doesn’t operate like a typical SWF. Some U.S. states, like Alaska with the Alaska Permanent Fund, have funds that resemble SWFs at a state level, funded by resource royalties.
Though there have been discussions and proposals over the years about creating a SWF for the U.S. for considering how to manage revenues from natural resources like oil and gas. However, none have come to fruition due to various political, economic, and legislative reasons.
Once incorporated and post commencement, US SWF would need to navigate issues of transparency, accountability, and the potential for political misuse, given the criticisms sometimes levelled at other SWFs regarding these aspects. Any move to use a SWF aggressively against another nation could lead to retaliatory actions or shifts in global investment patterns, potentially affecting the US economy as well.
Galactik Views