Newspaper icon
The latest issue of Financial Standard now available as an e-newspaper
READ NOW

Investment

Trump orders creation of US sovereign wealth fund

US President Donald Trump has signed an executive order calling for the creation of a sovereign wealth fund.

The executive order directs US secretary of the treasury Scott Bessent, who was sworn in last week by Supreme Court Justice Brett Kavanaugh - nominated by Trump during his first term - and Trump's nominee for secretary of commerce Howard Lutnick, to deliver a plan within 90 days for the creation of a sovereign wealth fund, according to documents from the White House.

The order mandates them to outline recommendations for funding mechanisms, investment strategies, fund structure, and a governance model.

A sovereign wealth fund would help maximise the stewardship of the nation's wealth, ensuring long-term economic competitiveness and fiscal sustainability, according to a White House statement.

"Sovereign wealth funds exist around the world as mechanisms to amplify the financial return to a nation's assets and leverage those returns for strategic benefit and goals," according to the statement.

It said the US could leverage such returns to promote fiscal sustainability, lessen the burden of taxes on American families and small businesses, establish long-term economic security, and promote economic and strategic leadership internationally.

It also noted that the federal government directly holds US$5.7 trillion in assets and indirectly, including through natural resource reserves, holds a far larger pool of assets that could be invested through a sovereign wealth fund for greater long-term wealth generation.

Trump said the establishment of a sovereign wealth fund, which the US has never had, is a very exciting event.

"We have a lot of things that create wealth, and you've seen that over the last two weeks," Trump said.

"We've created more wealth. Other people - my predecessors - have created 'de-wealth.'"

Trump also mooted the possibility of TikTok being included in the sovereign wealth fund.

"... we're going to be doing something, perhaps with TikTok, and perhaps not, if we make the right deal we'll do it, otherwise, we won't. But I have the right to do that," Trump said.

"We might put that [TikTok] in the sovereign wealth fund, whatever we make, or if we do a partnership with very wealthy people, a lot of options, but we could put that in the fund.

"We have a lot of other things we could put in the fund."

Trump added that he believes that a US sovereign wealth fund could grow to become one of the largest in a short period of time, noting that while some, such as Saudi Arabia's are on "the larger side," it will eventually catch it.

"I think it's about time that this country had a sovereign wealth fund," he concluded.

Bessent said that within the next year, the US will monetise the asset side of its balance sheet for the American people, putting those assets to work.

"We're going to study best practices from around the world," he said.

He added the sovereign wealth fund will be composed of a combination of liquid assets and "assets that we have in this country as we work to bring them out..."

Lutnick said the extraordinary size and scale of the US government and its business dealings with companies should create value for American citizens.

"If we're going to buy two billion COVID vaccines, maybe we should have some warrants and some equity in these companies and have that grow for the help of the American people," Lutnick suggested.

Read more: WealthSovereign wealth fundTikTokDonald TrumpWhite HouseHoward LutnickScott BessentSaudi ArabiaBrett Kavanaugh