US Wealth Fund!.. The Secret of Timing

The global economic arena has witnessed successive developments since US President Donald Trump entered the Oval Office in his second term, starting with the tariffs he imposed on many countries, including China, Mexico and Canada, which had an impact on global markets, up and down.

It seems that the days are pregnant with decisions and surprises, as Trump recently signed an executive order directing the US Treasury and Commerce departments to establish a sovereign wealth fund, indicating that the fund may buy the TikTok application.

So what is a sovereign wealth fund and why is Trump creating it now? Sovereign wealth funds are created to invest in the national interest, and are usually funded by countries rich in natural resources, as the British Guardian newspaper said that it is unclear how an American fund can operate or be funded.

US President Donald Trump signed an executive order directing the US Treasury and Commerce departments to establish a sovereign wealth fund. The efforts will be led by Treasury Secretary Scott Bessent and Howard Lutnick, the nominee for Secretary of Commerce.

Trump said while signing the order from the Oval Office on Monday: “We have tremendous potential. I think in a short period of time, we will have one of the largest funds.

What is a sovereign wealth fund and what does it do? Sovereign wealth funds are investment vehicles owned by countries. Most operate as an investment account, a development vehicle, or a combination of the two.

They are designed to act as an investment fund, allowing current money to be deployed in a way that benefits future generations. In contrast to pension funds, where people withdraw money to meet their own spending needs, sovereign wealth funds are supposed to invest for the benefit of the nation.

But sovereign wealth funds also invest in financial products and buy stakes in companies, which can provide future financial benefits and finance government budgets or social programs.

There are more than 90 such funds worldwide, managing more than $8 trillion in assets, according to the International Forum of Sovereign Wealth Funds. Well-known examples include the Saudi Public Investment Fund, the China Investment Corporation, and the Government Pension Fund of Norway.

How is a sovereign wealth fund fund funded? Typically, some or all of a country’s budget surplus is passed on to a sovereign wealth fund, which can then be used for new investments.

Many of the funds have been created by countries with strong commodity export industries, and the proceeds from the sales of oil, natural gas and minerals by state-owned companies often back the sovereign wealth funds.

About 60% of the funds are funded by revenues from natural resources, according to the IFSWF. Trump offered few details Monday about how the U.S. fund would work or how it would be financed.

Treasury Secretary Scott Bessent told reporters the plan was to monetize assets currently owned by the U.S. government “for the American people.”

The president has also previously said that revenues earned from tariffs on U.S. imports could form the basis of a wealth fund. Why hasn’t the U.S. had a wealth fund before, and why now? Sovereign wealth funds are typically found in countries with large foreign exchange reserves, such as China, or revenues from the sale of oil or other commodities, such as Norway and Saudi Arabia.

However, the U.S. has consistently run budget deficits in recent years. In fact, some U.S. states have smaller wealth funds, which are generally funded by commodities or land. The largest of these funds is the Alaska Permanent Fund, which began in 1976 and currently manages about $82 billion.

But the size of the US private equity sector on and off Wall Street is so large that various investment managers and private equity firms can manage huge pools of capital.

This would reduce the need for and availability of capital to create a sovereign wealth fund, absent political will.

Bissent has said that a US sovereign wealth fund could be created within 12 months. During his campaign in September, Trump proposed creating a fund to finance “great national endeavors,” including infrastructure projects such as highways, airports, manufacturing, and medical research.

Trump also suggested, without providing details, that the fund could be used to keep TikTok operating in the US. TikTok is currently operating due to an extension of Trump’s grant to extend the deadline for a forced sale or shutdown.

How big would a US sovereign wealth fund be? Trump has not given an initial size or target amount for a US sovereign wealth fund. However, when he spoke on the subject in September, he said the U.S. sovereign wealth fund should approach or exceed $2 trillion. Currently, the largest such fund is Norway’s Government Pension Fund Global with $1.74 trillion in assets, followed by the China Investment Corporation with $1.33 trillion, according to the Sovereign Wealth Fund Institute, a data provider. Abu Dhabi, Kuwait, Saudi Arabia and Singapore are among the countries with notable sovereign wealth funds, with assets ranging from $801 billion to $1.06 trillion, the institute said.

Here are some notable examples of other countries with sovereign wealth funds and how they are used. Norway: Norway has a $1.7 trillion sovereign wealth fund, the world’s largest. It invests the country’s oil and gas revenues in financial markets, including shares in foreign companies. About a fifth of the government’s budget is funded by income from the sovereign wealth fund.

China: China has a $1.3 trillion sovereign wealth fund. It invests in urbanization in Africa, the Belt and Road Initiative, and global energy markets, including several foreign renewable energy assets. The fund is used to pay for part of the government’s budget.

United Arab Emirates: Abu Dhabi has a $1 trillion sovereign wealth fund. It does not disclose its specific investments but has said it invests in broad asset classes such as index-linked funds, domestic and foreign equities, private equity, fixed income, treasuries, and more.

Saudi Arabia: Saudi Arabia has a $925 billion sovereign wealth fund. It invests in public and private Saudi companies as well as international investments.

The fund supports commercial projects such as refineries, petroleum industries, pipelines, storage, transportation, energy and other projects important to the Saudi economy.