Michael Lee Strategy founder Michael Lee explains President Donald Trumps executive order to create a U.S. sovereign wealth fund on Varney & Co.
President Donald Trump signed an executive order Monday directing his administration to set up a sovereign wealth fund (SWF) for the United States, which the White House says “will help maximize the stewardship of our national wealth.”
The EO directs Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick to present a plan within 90 days for the creation of the fund.
So what is a sovereign wealth fund, and how does it work?
President Donald Trump delivers his inaugural address in the Rotunda of the U.S. Capitol on Jan. 20, 2025, in Washington, D.C. (CHIP SOMODEVILLA/POOL/AFP via Getty Images / Getty Images)
Sovereign wealth funds are investment vehicles owned by countries. Most act as an investment account, or as a development tool, or a combination of the two. They are designed to be a nest egg, allowing current money to be deployed in a way that benefits future generations.
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Unlike pension funds where people withdraw money for their own spending needs, SWFs are supposed to invest for the collective good of a nation.
That could mean things like funding construction of an airport or school. But SWFs also often put money into financial products and buying stakes in companies, which can provide financial benefits well into the future and fund government budgets or social programs.
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Trump has suggested the U.S. could take a 50% stake in TikTok, for instance, which would be held in America’s forthcoming SWF.
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There are over 90 such funds across the world, managing over $8 trillion in assets, according to the International Forum of Sovereign Wealth Funds. The United Kingdom recently announced its own plans to pursue forming an SWF.
In the U.S., 23 states maintain their own funds that control in total $332 billion in assets, according to the White House.
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Typically, some or all of a country’s budget surplus is passed to the SWF, which can then use it for new investments.
However, the U.S. has consistently run budget deficits in recent years.
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Many funds have been set up by countries with strong commodities export industries, and proceeds from oil, natural gas, metals and minerals sales by state-owned companies are often behind SWFs. Around 60% of funds are funded by revenue from natural resources, according to the International Forum of Sovereign Wealth Funds.
Reuters contributed to this report.
