Discover how the U.S. plans to secure its financial future by building its own sovereign wealth fund, inspired by global giants like Norway's $1.4 trillion fund. 

A sovereign wealth fund (SWF) is a state-owned investment vehicle that manages a nation's surplus revenues. Typically financed through excess reserves from trade surpluses, natural resource revenues, or foreign exchange holdings, these funds serve multiple purposes - stabilizing government finances, ensuring long-term economic security, and generating wealth for future generations. Sovereign wealth funds invest in diverse asset classes such as stocks, bonds, real estate, infrastructure, and alternative investments, aiming for long-term financial growth.

In a pivotal move designed to enhance America's financial stability and promote future economic growth, President Trump has signed an executive order to establish a sovereign wealth fund (SWF). This order sets the stage for the creation of the fund within the next 12 months. Treasury Secretary Scott Bessent and incoming Commerce Secretary Howard Lutnick have been tasked with developing funding mechanisms, investment strategies, fund structure, and the governance model within 90 days.

Previous & Existing Initiatives

Many countries worldwide, including Norway and Saudi Arabia, already have sovereign wealth funds. The Biden administration had also previously considered creating such an investment vehicle. Even within the U.S, 23 states manage their own funds, collectively holding $332 billion in assets. These state-level funds can finance various services or provide dividends, like the Alaska Permanent Fund, which utilizes oil revenues to invest in stocks and other traditional sectors.

Current Focus

With the current U.S administration prioritizing fiscal responsibility and wealth creation, the U.S. sovereign wealth fund could be directed towards national development projects, such as infrastructure and manufacturing hubs. Additionally, it might support areas deemed crucial for national security, including supply chain minerals, defense capabilities, and nuclear fusion projects. Another proposal by President Trump involves leveraging the fund for a potential TikTok deal, given the app's risk of facing a ban.

Norway’s SWF: A Benchmark for Success

Norway’s GPFG is an exemplary model of how sovereign wealth funds can ensure long-term prosperity. Established in 1996, the fund transformed surplus oil revenues into a globally diversified investment portfolio. As seen in the chart above, Norway’s SWF has steadily grown, surpassing $1 trillion in assets by 2017 and reaching $1.74 trillion in 2024.

The fund has achieved remarkable returns by allocating 71% of its assets to equities, 27% to fixed-income investments, and a small portion to real estate. The image also highlights Norway’s per capita wealth distribution through the fund. In 1998, the fund was worth approximately $5,000 per Norwegian citizen.

By 2010, this had increased to over $100,000 per citizen, and by 2019, the figure exceeded $200,000. The 2024 projections suggest that every Norwegian citizen effectively has more than $300,000 in wealth stored in the fund. This strategic approach ensures economic stability and generational wealth transfer, making Norway’s SWF a gold standard in sovereign wealth management.

Other Examples

• China's sovereign wealth fund stands at $1.3 trillion. Its investments span the urbanization of Africa, the Belt and Road initiative, and global energy markets, including numerous foreign renewable energy assets. Additionally, the fund contributes to the government's budget.

• Abu Dhabi, UAE, boasts a $1 trillion sovereign wealth fund. While specific investments are undisclosed, the fund allocates resources across various asset classes, such as indexed funds, internal and external equities, private equities, fixed income, and treasury.

• Saudi Arabia's sovereign wealth fund is valued at $925 billion. It invests in both public and private Saudi companies and international ventures. The fund supports significant commercial projects, including petroleum refineries, industries, pipelines and storage, transportation, energy, and other key sectors critical to the Saudi Arabian economy.

Is SWF a Good Idea for the U.S.?

Creating a sovereign wealth fund in the U.S. could be a prudent long-term strategy, offering financial stability, economic diversification, and intergenerational wealth-building opportunities. However, challenges such as funding sources, political consensus, and investment management must be carefully navigated.

If structured well, such a fund could provide crucial infrastructure investment, bolster innovation, and even generate direct financial benefits for American citizens, much like Norway’s model. Given the presence of successful state-level funds, a national SWF could leverage these experiences to craft a sustainable and impactful investment vehicle for the nation’s future.

Originally published at Substack.