Two of President Donald Trump’s Cabinet members have until early May to prepare a plan for the creation of a U.S. sovereign wealth fund — despite America’s $36T national debt and the federal government’s 20-plus years of operating in a budget deficit.
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Trump signed an executive order Monday directing the secretaries of commerce and the treasury to deliver an outline for a U.S. sovereign wealth fund within 90 days. The plan is expected to include recommendations for funding mechanisms, investment strategies, fund structure and a governance model.
Sovereign wealth funds are typically major investors in commercial real estate and have only grown in prominence in CRE circles since the 2008 financial crisis.
But the funds are often established in nations with large current-account surpluses that come from natural resource exports. Kuwait is credited with setting up the first sovereign wealth fund in 1953 thanks to its oil exports, Bloomberg reported.
Trump said the U.S. fund could eventually rival Saudi Arabia's, which has around $925B in assets under management. And during his Senate confirmation hearing last month, Treasury Secretary Scott Bessent said the U.S. has “fantastic assets” that could be used for “revenue-generating opportunities.”
“We are going to monetize the asset side of the U.S. balance sheet,” the former hedge fund manager told reporters Monday. “We are going to put the assets to work. And I think it’s going to be very exciting.”
In addition to CRE, many nations’ sovereign wealth funds go into stocks. During a speech to the Economic Club of New York last year, Trump said a U.S. sovereign wealth fund would be used for “great national endeavors.”
“We’ll be able to invest in state-of-the-art manufacturing hubs, advanced defense capabilities, cutting-edge medical research and help save billions of dollars in preventing disease in the first place,” Trump said in the September speech.
The U.S. government directly holds $5.7T in assets, including $1.3T in property and equipment, as well as a “far larger sum of asset value,” according to a White House fact sheet released Monday.
Trump indicated a potential government deal for TikTok’s U.S. assets could be added to the planned fund.
The nation could also obtain equity warrants in companies that provide coronavirus vaccines to the federal government, said Howard Lutnick, Trump’s nominee for commerce secretary.
The idea isn't a hit with some economists.
Expressing concerns about issues such as oversight, RSM US LLP Chief Economist Joseph Brusuelas called the planned sovereign wealth fund “an interesting idea that will prove problematic at best,” according to Bloomberg.
The U.S. produces a huge amount of natural resources, but those are not government-controlled like in other countries. Tariffs put in place by Trump on goods imported into the U.S. have been suggested as one source of capital for the sovereign wealth fund.
In addition to the sovereign wealth funds already in place in countries around the world, 23 U.S. states maintain their own funds that control $332B in assets.
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