In February 2025, the Trump administration issued an executive order containing a plan for the establishment of an American sovereign wealth fund (SWF), a state-owned investment fund comprised of government revenues. In his executive order, President Trump argued that creating an SWF would promote fiscal responsibility, decrease tax burdens on families and businesses, and enhance the United States’ international economic and strategic leadership. Absent, however, was significant elaboration on how a SWF would achieve these aims.
There is a marked lack of consensus among economists regarding whether it is in the best interest of the United States to establish an SWF. There are dozens of issues that remain to be addressed—the funding of an SWF in a country with an annual budget deficit equal to 7 percent of the GDP, the types of investments an SWF ought to make, and which sectors of the economy it should target, and managing conflicts of interest that could breed corruption. Ultimately, if investments are transparent and overseen by an independent advisory board, creating an SWF funded through borrowing or leveraging other federal assets could effectively spur investment in overlooked industries, with returns invested in infrastructure and other projects for public benefit.
The United States already holds $8.8 trillion in foreign and domestic investments, including over $1 trillion each in the United Arab Emirates, Japan, and Qatar (meaning that American capital and resources are directed towards projects in each of these countries), and hundreds of billions in American companies such as NVIDIA, OpenAI, and Apple. Indeed, the federal government is also an active investor in privately-owned companies, channeling capital through In-Q-Tel (the venture capital branch of the Central Intelligence Agency), the International Development Finance Corporation, and the Small Business Investment Company program of the Small Business Administration, to name a few. An SWF would principally differ from the government’s existing investments due to its long-term investment horizon—meaning the portfolio will typically be held for decades before being sold—and the consequent lack of need for liquidity.
SWFs are in operation in over 90 nations and 20 US states. Within the United States, the revenue from SWFs is used either to finance public services or to augment the state government’s overall revenue. The world’s largest SWF is the Government Pension Fund (GPF) of Norway, which holds approximately $2 trillion in assets. The GPF is funded through surplus oil and gas revenues, and its portfolio is managed by Norges Bank Investment Management, which is affiliated with the central bank. Since 1998, the fund has generated annualized returns of 6.44%. Its investment strategy is determined jointly by Norges Bank, the Ministry of Finance, and an independent Council on Ethics, which conducts thorough reviews of every company before investment and closely advises investment managers. Interestingly, the GPF invests primarily in foreign companies to minimize the risk of politicizing investments. Its revenues have been used to save for future generations, serving as a financial reserve, and shielding the Norwegian economy by providing stability amidst fluctuations in the oil and gas markets. The Alaska Permanent Fund (APF) operates similarly: Managed by a six-person board of trustees appointed by the state governor, it invests surplus oil and mining revenues into both private and public assets, intending to sustain these revenues for long-term societal benefit. Notably, the APF also pays an annual dividend to qualifying Alaskan residents from its profits, who must be legal residents of only the state of Alaska and have a clean criminal record.
As the United States faces mounting fiscal challenges, including a budget deficit now in excess of $37 trillion and the risk of Medicare and Social Security becoming insolvent, it is now imperative that the United States consider establishing an SWF to address some of these concerns. The United States should look to the model offered by Norway when implementing its own SWF by emulating Norway’s disciplined investment strategy and transparent governance structure to achieve the same high returns.
Some of Norway’s strategies are patently unavailable: whereas Norway’s oil industry contributes over 20 percent of GDP, in the United States, oil makes up around 8 percent of GDP, eliminating fossil fuel mining as a sustainable revenue source for an SWF. Unlike Singapore, China, or Portugal, the United States cannot fund its SWF through budget or trade surpluses. One feasible option for financing an SWF is to monetize existing assets, which total $5.7 trillion—the government holds approximately $1 trillion in gold, $15 to $20 billion in cryptocurrency, and has the option to sell some federally-owned land to generate the initial capital needed for an SWF. It is also possible to finance an SWF through incurring additional debt, but this is riskier given the United States’ ever-expanding deficit.
Unlike other SWFs, the principal goal of an American SWF cannot be to generate fiscal revenue directly. Even if an American SWF worth $1 trillion earns 6 to 7 percent annual returns, it would generate a yearly revenue of just 0.3 percent of GDP—far from enough to meaningfully decrease the deficit. Instead, a US-backed SWF should exist to strengthen supply chains in strategic industries, such as domestic microchip manufacturing or elsewhere in the energy and utilities sector. The Department of Defense recently invested $400 million in equity in MP Materials, the only American producer of rare earth materials, which is helping the United States counter Chinese dominance in this sector. There is bipartisan agreement that increased investment in rare minerals is a long-term economic priority, and an American SWF could advance these goals by purchasing equities in these companies. As the United States faces mounting competition from China in the biotechnology industry, part of an American SWF could also be invested in this sector to reduce supply chain weaknesses and ensure America’s continued dominance. If necessary, the United States could also invest a portion of its SWF in the bond market by targeting specific maturities to shift demand and, in turn, yield curves. The annual returns generated by an American SWF, which would likely align with global SWF averages, can be reinvested into projects that benefit the public, including improving infrastructure.
Amidst the Trump administration’s recent efforts to interfere with the Federal Reserve through the attempted firing of Lisa Cook and threats to fire Chairman Jerome Powell, there are valid concerns about whether investments in an American SWF would become politicized. The most notable historical example occurred in 2008, when the Chinese government allegedly purchased hundreds of millions in Costa Rican bonds through its SWF to persuade Costa Rica to end diplomatic relations with Taiwan. In the United States, there is deep disagreement between political parties regarding where federal money should be spent, especially amidst the October government shutdown. Investments in traditional versus renewable energy through an SWF, for instance, might be viewed by some as partisanly biased.
Addressing the risk of politicized investments in an American SWF will require strict regulations: an independent board of directors to manage the fund (potentially modeled after the structure of the Federal Reserve), oversight by market regulators (including the Securities and Exchange Commission), and rigorous disclosure of any conflicts of interest. The United States would also benefit from following the transparency standards established by the GPF. Furthermore, Congress should formally define the SWF’s long-term investment goals to ensure its managers operate within a clear, apolitical framework.
Ultimately, establishing an SWF in the United States is feasible and beneficial, but the government must proceed with caution. With the necessary safeguards in place and a focused investment strategy, an SWF would generate strong returns and help lift overlooked industries. The United States is a nation that prides itself on its capacity for innovation; establishing an SWF is an ambitious step towards addressing longstanding challenges and saving for our future. The time to act is now.