Key Takeaways
- • President Donald Trump signed an executive order on February 3, 2025 directing the creation of a U.S. sovereign wealth fund within the next year, and said the fund could potentially buy the short-video app TikTok.
- • The order directs the Treasury and Commerce Departments to submit a plan within 90 days covering funding mechanisms, investment strategies, fund structure, and a governance model.
- • The funding mechanism is unclear; the U.S. runs a budget deficit, unlike most sovereign wealth funds, and experts said Congress would likely need to authorize new funding.
- • Over 90 sovereign wealth funds worldwide manage more than $8 trillion in assets, according to the International Forum of Sovereign Wealth Funds.
- • One reported option is converting the U.S. International Development Finance Corp (DFC) into a sovereign wealth fund-style vehicle, per Bloomberg News.
Summary
U.S. President Donald Trump signed an executive order on Monday, February 3, 2025, ordering the creation of a sovereign wealth fund within the next year. Trump said the fund could potentially buy TikTok, the short-video app whose fate has been uncertain since a law requiring its Chinese owner ByteDance to divest or face a ban took effect on January 19. Trump has said he is in talks with multiple parties over a TikTok purchase and could decide on the app's future in February. The app has about 170 million American users. "We're going to be doing something, perhaps with TikTok, and perhaps not," Trump said. "If we make the right deal, we'll do it. Otherwise, we won't...we might put that in the sovereign wealth fund."
The executive order is sparse on details. It directs the Treasury and Commerce Departments to submit a plan within 90 days, including recommendations on "funding mechanisms, investment strategies, fund structure, and a governance model." Treasury Secretary Scott Bessent told reporters the fund would be set up within 12 months and said the government would "monetize the asset side of the U.S. balance sheet for the American people," through a combination of liquid assets and other national assets. Administration officials did not explain how the fund would operate or be financed. Trump previously suggested it could be funded by "tariffs and other intelligent things."
Funding is the central open question. Sovereign wealth funds typically draw on budget surpluses, and the U.S. runs a deficit. Experts cited by Reuters said Congress would likely need to authorize new funding, and the order directs officials to review any legislation needed. Clemence Landers, a former Treasury official now at the Center for Global Development, said there has been talk of repurposing the DFC but that creating such a fund would require Congress. "Obviously you can't establish an institution by executive order and more to the point is you can't fund an institution by executive order," she said. Colin Graham, head of multi-asset strategies at Robeco, said that "creating a sovereign wealth fund suggests that a country has savings that will go up and can be allocated to this," adding that "the economic rules of thumb don't add up." Investors described the announcement as a surprise.
According to Bloomberg News, one approach under consideration would convert the DFC, a government agency that partners with private parties to finance projects in the developing world, to function similarly to a sovereign wealth fund. Trump on Friday nominated Benjamin Black, managing partner at Fortinbras Enterprises and son of Apollo Global Management co-founder Leon Black, to head the DFC. The Biden administration also reportedly considered a similar fund before the November election, according to The New York Times and Financial Times.
More than 90 sovereign wealth funds worldwide manage over $8 trillion in assets, according to the International Forum of Sovereign Wealth Funds, with many concentrated in the Middle East and Asia. Several U.S. states, including Alaska, Texas and New Mexico, already operate wealth funds, typically financed by natural resource revenue and used for education and tax relief. Trump has previously said the fund could finance infrastructure, manufacturing and medical research.
The executive order is sparse on details. It directs the Treasury and Commerce Departments to submit a plan within 90 days, including recommendations on "funding mechanisms, investment strategies, fund structure, and a governance model." Treasury Secretary Scott Bessent told reporters the fund would be set up within 12 months and said the government would "monetize the asset side of the U.S. balance sheet for the American people," through a combination of liquid assets and other national assets. Administration officials did not explain how the fund would operate or be financed. Trump previously suggested it could be funded by "tariffs and other intelligent things."
Funding is the central open question. Sovereign wealth funds typically draw on budget surpluses, and the U.S. runs a deficit. Experts cited by Reuters said Congress would likely need to authorize new funding, and the order directs officials to review any legislation needed. Clemence Landers, a former Treasury official now at the Center for Global Development, said there has been talk of repurposing the DFC but that creating such a fund would require Congress. "Obviously you can't establish an institution by executive order and more to the point is you can't fund an institution by executive order," she said. Colin Graham, head of multi-asset strategies at Robeco, said that "creating a sovereign wealth fund suggests that a country has savings that will go up and can be allocated to this," adding that "the economic rules of thumb don't add up." Investors described the announcement as a surprise.
According to Bloomberg News, one approach under consideration would convert the DFC, a government agency that partners with private parties to finance projects in the developing world, to function similarly to a sovereign wealth fund. Trump on Friday nominated Benjamin Black, managing partner at Fortinbras Enterprises and son of Apollo Global Management co-founder Leon Black, to head the DFC. The Biden administration also reportedly considered a similar fund before the November election, according to The New York Times and Financial Times.
More than 90 sovereign wealth funds worldwide manage over $8 trillion in assets, according to the International Forum of Sovereign Wealth Funds, with many concentrated in the Middle East and Asia. Several U.S. states, including Alaska, Texas and New Mexico, already operate wealth funds, typically financed by natural resource revenue and used for education and tax relief. Trump has previously said the fund could finance infrastructure, manufacturing and medical research.
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