US President Donald Trump gave the Treasury and Trade Departments 90 days to come up with a plan to establish a Fund of sovereign wealth (SWF).
“We will create a lot of wealth for the fund,” Trump told reporters. “And I think it’s time that this country had a sovereign fund for wealth.”
He also suggested that the fund can be used to buy a tictoka.
“We’ll do something with Tictok, and maybe not,” Trump said. “If we do the right job, we will do it. Otherwise, we will not … we could put it in a fund of sovereign wealth.”
Here’s what we know what we know about Trump’s SWF plan.
What is a fund of sovereign wealth?
Governments have and use sovereign wealth funds for investing in global assets for long -term growth.
The official definition created by the International Forum of Funds of Sovereign Wealth (IFSWF) describes SWF as composed of three elements:
- The government of the country, including federal and state governments, possesses it.
- The fund includes investments as a foreign financial asset.
- The Fund has investments with financial goals, such as infrastructure and economic development.
According to IFSWF, the key elements of SWF do not include public pension funds, which are ultimately owned by people who have the right to receive benefits from them or the reserves of foreign currency held by the central bank of the country, which are primarily used for monetary stability rather than investments.
SWF may act as an investment account for the long -term benefit of the nation; Stabilization tool, which provides funds that can be drawn from when it requires a budget; development tool for support of economic policy; Or a combination of all three.
Ultimately, they are designed as an egg nest, which allows the role of current excess funds in favor of future generations. The countries that have been rich in goods have traditionally used them to invest profit from the sale of oil, natural gas, metal and minerals for the future. According to IFSWF, about 60 percent of the funds come from revenue from natural resources.
Unlike pension funds, of which people withdraw money as income to support themselves in retirement, SWF should invest in a collective good of nations.
This could mean funding for the construction of the airport project, school or infrastructure project. SWFs also often invest in financial products and buy roles in companies, which can provide long-term economic security and finance state budgets or social programs.
Where will the money come from to set up a US fund?
Trump was unclear in terms of the size of any US fund for sovereign wealth or how it would be funded.
The president’s executive command directs trade and treasury departments to include the recommendations of the financing mechanisms, investment strategies, funds structure and management model.
Scott Bessent Treasury Secretary told reporters that the Fund would be set up in the next 12 months, but also did not determine where the money would come from.
“We will stiffen the assets of the American balance sheet for the American people,” Bessent said. “There will be a combination of liquid assets, the property we have in this country as we work to pull them out for the American people.”
Stan Veuger, an older colleague of the US Institute of Enterprise, said that property bezen related to property and even government Bitcoin Holdings.
The United States seized at least 215,000 bitcoins involved in criminal activity, worth almost $ 21 billion at current prices, from 2020, according to the Analysis of the Crypto company 21.Co. Trump suggested last year that he could have plans for a crypto reserves similar to oil reserves.
Bitcoin Holdings “could be the basis of a fund of sovereign wealth, although, of course, their value is relatively modest,” Veuger told Al Jazeera.
What other countries have set SWF?
According to IFSWF, more than 90 such funds are governed by more than $ 8 trillion property around the world.
The largest fund is the Norwegian Government Pension Fund Global, which has $ 1.74 trillion property, followed by China Investment Corporation, with $ 1.33 trillion property, according to the Sovereign Funds Institute of Wealth, Data Provider.
Abu Dhabi, Kuwait, Saudi Arabia and Singapore are among other countries with prominent sovereign wealth funds, with assets between $ 801 billion and $ 1.06 trillion, the Institute said.
Is SWF Setting up a good idea for now?
Trump is not the first to consider setting SWF for the United States.
The administration of former President Joe Biden also considered the establishment of such a fund before Trump’s elections in November, according to the New York Times and the Financial Times.
And Trump praised the idea of establishing a fund, saying he could finance “great national efforts”, such as infrastructure projects, including highways and airports, production and medical research.
Some investors on Wall Street said the news was a surprise and questioned if it was a good idea.
Usually, SWF is funded from excess funding in the country-it was that it is from the sale of natural resources or from insufficient spending of the budget. However, the United States has been consistently managed by a budget deficit since 2001. He made a $ 1.8 trillion deficit in a fiscal year for 2024, which was $ 138 billion – $ 8 percent – more than in the previous year. Creating a sovereign wealth fund would probably require the approval of the congress.
“The creation of a sovereign wealth fund suggests that the country has savings that will increase and can be assigned to it,” said Colin Graham, head of a number of assets in Robeco in London. “Economic rules of thumb do not add up.”
Veuger said at the US Institute of Entrepreneurship that there is also a risk that a fund manager could invest with him.
There is no reason to think that US SWF could consistently beat the market until it has used its political power, “he said.” I don’t think that’s a good idea for now. “
There is also a criticism of SWF in general. According to a report published by Carnegie Endowment for International Peace, many SWF lacks transparency, causing concern about corruption and political interference.
“Without detailed financial and operational information, the doors are left wide open to growing managers and political elites to embezzle in investment earnings,” said a sovereign wealth report: corruption and other risk of management.
“Not only does this lack of transparency can make SWF sensitive to corrupt use, but at the macroeconomic level it also increases the spectrum of real risks of destabilization if the funds have succeeded, poor management or quickly withdrawing funds from the target markets,” it has been added.
Can SWF be used to buy a ticter?
Trump has suggested that a wealth fund can buy a tictok, but no solid has been announced. The fate of the company in the United States is uncertain since January 19, when the law demanding that its Chinese owner, Bytetlance, to sell it on the basis of national security or confront the ban.
After taking his duty on January 20, Trump signed an executive command, wanting to delay the implementation of the law for 75 days.
Trump said he had talked to more people about buying a Tictok and that he was likely to have a decision on the future of the application this month. The popular application has about 170 million US users.
