Donald Trump created the Sovereign Wealth Fund – which countries have it and why is it important?

Among the many swift and far-reaching actions taken by US President Donald Trump during his first two weeks after taking office is the signing of an executive order to create a US sovereign wealth fund.

"We have tremendous potential," the American leader said during the signing of the order in the Oval Office, writes newsweek.

"I think in a short period of time, we will have one of the largest funds," the 78-year-old said, suggesting the fund could end up buying video-sharing platform TikTok.

However, some experts have been critical of a US sovereign wealth fund since he first mentioned it during the presidential campaign, fearing that the nation would not be able to match the financial strength of some of the world's largest sovereign wealth funds.

Why is it important?

During his 2024 presidential campaign, Trump used the same slogan that helped him win in 2016, “Make America Great Again.” The US president has promised to reduce inflation and boost economic growth, presenting tariffs as a solution.

Over the past two weeks, he has enacted a series of policies in this regard, threatening Canada and Mexico with 25 percent tariffs and imposing a 10 percent tariff on Chinese goods.

Read too Trump's tariffs - what are they and what is their impact?

Trump's goal for creating a sovereign wealth fund is to generate more federal revenue as he plans to introduce tax cuts and reduce the size of government; however, experts warn that the government may not have enough money to create a robust fund.

What do you need to know?

Sovereign wealth funds (SWFs) are investment funds created by national governments and consist of assets such as stocks, bonds, real estate and other financial instruments.

While funding for a SWF can come from a variety of sources, some of the most common sources are a country's budget surpluses, state-owned natural resource revenues, bank reserves, and foreign exchange operations.

These funds are usually created with a specific mandate to generate economic benefits for the citizens of the state, the Telegraph reports.

While the US federal government does not have a sovereign wealth fund, 21 states in the US already have their own funds.

The largest fund is the Alaska Permanent Fund Corporation, created in 1976, which on December 31 had a value of $79.6 billion. This fund pays annual dividends to Alaska residents: last year, over 600 Alaskans received a dividend of $1702.

There are over 90 sovereign wealth funds worldwide, according to the International Forum of Sovereign Wealth Funds, but the largest ones are in countries that have large foreign exchange reserves, such as China, or large revenues from the sale of oil and other natural resources, such as Norway and Saudi Arabia.

Overall, more than $8 trillion is managed by SWFs, the institution writes.

Norway
The Norway Government Pension Fund Global is the largest sovereign wealth fund in the world, with a total of $1,738,806,263,000 (over 1.6 trillion euros) in assets, according to data from the SWF Institute.

It was established in 1990 as the Government Petroleum Fund with the idea of ​​retaining excess revenues from Norway's oil trade.

The fund invests in stocks, fixed income and real estate, according to Investopedia.

China
The China Investment Corporation, founded in 2007 and headquartered in Beijing, is the world's second-largest sovereign wealth fund, with $1,332,071,000,000 (1.28 trillion euros) in assets. It is used to manage part of the country's foreign exchange reserves.

China owns the third largest sovereign wealth fund in the world, SAFE Investment Company, founded in 1997 and with current assets totaling $1,090,000,000,000 (1.05 trillion euros).

United Arab Emirates
The Abu Dhabi Investment Authority, established in 1976, is the fourth largest sovereign wealth fund in the world, with $1,057,545,000,000 (1.01 trillion euros) in assets.

Where did he go
The Kuwait Investment Authority, established in 1953, has a total of $1,029,000,000,000 (€991.5 billion) in assets. It is the fifth largest sovereign wealth fund in the world.

Saudi Arabia
The Public Investment Fund of Saudi Arabia, founded in 1971 and headquartered in Riyadh, Saudi Arabia, is the sixth largest sovereign wealth fund in the world with $925,000,000,000 billion (€891.3 billion) in assets.

Other countries with sovereign wealth funds include Qatar, Turkey, Korea, Azerbaijan, Kazakhstan, Oman, New Zealand, Ethiopia, Libya, Russia, Malta, Ireland, Egypt, Indonesia, Chile and Japan, among smaller ones.

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Meanwhile, the Law on the Sovereign Fund, approved in 2023 by the Kosovo Assembly, was contested by opposition parties. The Democratic League of Kosovo (LDK) and the Democratic Party of Kosovo (PDK) have sent this law for evaluation to the Constitutional Court, which has not yet issued a decision.

What will happen next?

The executive order signed by Trump on Monday asks the Treasury and Commerce Departments to submit a plan for creating a US sovereign wealth fund within 90 days, including recommendations for "the funding mechanism, investment strategies, fund structure and a governance model."

The US president did not provide many details on how the US sovereign wealth fund will operate and be financed.

"It's a very exciting event. We're going to have a sovereign wealth fund, which we've never had before. We have a lot of things that create wealth, and if you look at this over the last two weeks, I think we've created more wealth," he said.

Treasury Secretary Scott Bessent said the idea is to "monetize the wealth side of the U.S. balance sheet for the American people" through "a combination of liquid assets, assets that we have in this country and that we are working to get out for the American people."

Trump has previously suggested that revenue from "tariffs and other smart things" could go into the fund.

Experts are skeptical about how a U.S. sovereign wealth fund might work. Researchers at the Center for Global Development wrote in a recent update that “even amid growing (rare) bipartisan interest, there are big questions about the practicalities of new proposals for sovereign wealth funds—including what resources would be used to capitalize such a fund, what investments it would support, where it might be located, and the relevance of a SWF in the U.S. context.” /Telegraph/