On February 3, President Trump signed an executive order to develop a plan for a U.S. sovereign wealth fund. In Norway, Saudi Arabia, and Singapore, similar funds have been used for years, both as emergency financial reserves and as vehicles for long-term investment. The executive order assigns the Secretary of the Treasury, the Secretary of Commerce, and the Assistant to the President for Economic Policy to draft recommendations for how to construct and legally authorize a U.S. sovereign wealth fund.

How a government over $36 trillion in debt would capitalize a sovereign wealth fund wasn’t made clear. The order itself is light on detail. A fact sheet released with the order points to the $5.7 trillion of assets on the U.S. balance sheet. At the signing, Treasury Secretary Scott Bessent gave a general outline: “we’re going to monetize the assets side of the U.S. balance sheet.” Trump, on the other hand, claimed the money would come from tariffs, and predicted that, “in a short period of time, we’d have one of the biggest funds.”

The goals of the fund were left loose as well and include “maximizing stewardship of our national wealth,” and investing in “great national endeavors.” The most telling details we have are suggestions from Trump and his allies about potential investment targets. Secretary of Commerce, Howard Lutnick, proposed using the fund to get “some warrants and some equity,” in companies with large government contracts. Trump himself has mused that it could buy a fifty percent stake in TikTok, enabling it to be a U.S.-based company while complying with the Biden-era law forcing its sale. Neither of these is unreasonable on its face, and the former is downright shrewd—a tactic common in the private sector.

Indeed, while the details remain scant today, the idea of a U.S. sovereign wealth fund has a great deal of potential. The “great national endeavors” that the order aspires to fund could be a hopeful, animating force for the country. It could also lend critical support to U.S. industries struggling to compete globally. But, like any investment strategy, it is risky. Executed well, a sovereign wealth fund could deliver major benefits. Done poorly—heavily politicized or undisciplined—it would be an expensive political flashpoint that the country can ill afford.

An Open-Ended Financial Tool of State

Our collective image of sovereign wealth funds is colored by the largest and most conspicuous examples from the Persian Gulf. Vast pools of capital—estimated at $13 trillion globally—bubbling up as black gold from parched khaki earth, or eleven-figure investments into sports leagues and misbegotten infrastructure. That impression, not wholly unjustified, is incomplete.

Sovereign wealth funds exist everywhere. There are already more than twenty active sovereign wealth funds in the U.S. at the state level. Not all such funds are based around oil money either, though it doesn’t hurt. Of more than one hundred sovereign wealth funds that exist globally, just 45 percent are funded by money from the sale of natural resources.

Sovereign wealth funds that don’t benefit from oil or other natural resources revenues typically get funding from financial windfall—like sale of land—or foreign exchange reserves. Increasingly, countries establishing sovereign wealth funds have looked beyond these traditional sources of capital. In 2017, Turkey, hardly a model of fiscal abundance, created a sovereign wealth fund, funding it directly from government tax revenue. India, Bangladesh, and the United Kingdom also have plans for sovereign wealth funds.

The goals of sovereign wealth funds fall into roughly three categories: financial returns, economic development, and aiding strategic industries. The actual investments that such funds make run the gamut: public and private markets, real estate, infrastructure, direct investments, fund investments, debt, equities. Even straight-line cities carved out of the desert such as Saudi Arabia’s NEOM project. Any asset class that can swallow big checks is a potential target for sovereign capital.

All it takes to have a fund is access to capital and a measure of foresight, something that used to be more common in U.S. political culture. In a series of laws passed between 1785 and 1959, whenever a new state was admitted to the Union, the federal government made large grants of land to the state for the long-term funding and maintenance of public education.

Other states took it upon themselves. When Texas joined the United States, the federal government paid the state $3 million to settle old debts, and $3 million for giving up its claim to land that would become parts of New Mexico, Colorado, Wyoming, Oklahoma, and Kansas. Texas used $2 million of this one-time windfall to capitalize the Texas Permanent School Fund in 1854. The fund also was to receive 10 percent of all tax revenue. In the 1850s, Texas wasn’t the petrostate we know today—oil was only discovered there in 1866, twenty-one years after the permanent fund was created.

In short, the funding for a sovereign wealth fund can be whatever the country decides—including debt.

Worrying About Debt Versus Investing in Vision

Despite few details on the administration’s ultimate plans, articles decrying the President’s order sprouted like mushrooms after it was released. Many commenters are concerned about investing while the country is in debt, drawing a contrast to surplus-funded sovereign wealth funds.

First, whether it’s a good idea to pay down debt or to stay in debt and invest depends a lot on what you expect the returns to look like. At the surface level, if your expected return is higher than the rate on your debt, it’s a good idea. The specific source of funding is irrelevant. A sovereign wealth fund might also have aims that aren’t strictly financial. For the sake of incremental resilience or security, the fund might sensibly target a rate of return lower than what it is paying on debt.

There is some more nuance here, as economist Tyler Cowen has pointed out. The question isn’t simply whether the government can earn a rate of return above its borrowing cost. If that’s possible then the government would make a gain on its investments. If in doing so the government invests in opportunities that would have otherwise attracted private investment, then the fund would have just shifted gains from the private sector to the fund. Cowen’s argument is correct as far as it goes, but it ignores a few important factors.

The involvement of a sovereign wealth fund and its unique relationship to the government can unlock opportunities that private investors could never have accessed themselves. It might even make those opportunities available to private investors, increasing the aggregate demand for capital. There is also the fact that, politically, theoretical gains foregone in the private sector are probably easier to accept than an increase in taxes.

A second common complaint is that President Trump himself cannot be trusted with an investment fund, or that politicians generally cannot be trusted at all. It is true that trust in politicians is at a justified historic low. If anything, this should be an argument for trying new things, not for continuing doing the same things that have led to historically low trust in government. Without a proposal to dissect, arguments that the fund would be badly managed are simply assuming their conclusion.

To have any hope of building a more cohesive society, citizens must believe that their government is working for them. Existing institutions, demonstrably, do not engender such belief. People need to see examples of the government taking thoughtful action for the public. Too often, the workings of the government are opaque and confusing to citizens. There is value in clear, unambiguous accomplishments. It’s easy to see how the administration’s proposed investments could turn into happy outcomes that are legible to the average voter: “we saved TikTok, and it’s a U.S. company now,” or “we got a fantastic deal on vaccines—we’re getting part of the profits from all vaccine sales.” All else equal, such transparency also sets better political incentives for good government.

Finally, there is a concern that the fund would “distort” the market. “It would take resources from the private economy… and mess with the business decisions of private companies,” whined The Wall Street Journal editorial board. The first two criticisms are bad arguments, but this one misses the point entirely.

The true potential of a sovereign wealth fund lies in its ability to create and invest in a forward-looking, strategic vision for the future. The great national endeavors a sovereign wealth fund would pursue are a way to address questions that many Americans are anxious about. What will tomorrow look like? How is our country going to succeed? Even, what does it mean to be an American? This kind of vision is sorely lacking in both the country and in American politics. Trump’s fund won’t cure the country’s existential malaise, but it could become an institution that citizens can look to with pride and confidence. With the assurance that someone is using some foresight on their behalf.

Enlightened Competition in a Global Market

The most important practical reason to have a sovereign wealth fund is that muscular state support for the economy is what it takes to be competitive. For all its strength, the U.S. is simply not the economic hegemon it once was. The U.S. is already behind China in the manufacture of cars and trucks, nuclear reactors, renewable energy, batteries, drones, steel, and most electronic components. Through the launch and open-sourcing of DeepSeek R1, we learned that the U.S. lead in artificial intelligence is much narrower than many had thought. A similar realization is happening in biotechnology. This is what a rout looks like.

The Chinese government has decades of experience identifying important technologies and supporting their fledgling domestic industries over a long time-horizon. A full treatment of state interventions in the Chinese economy is well beyond the scope of a short article, but a few examples illustrate the point:

Foreign companies trying to access the Chinese market are often required to transfer technology to a local entity. The foreign company is compelled to create a joint venture with a local Chinese partner. The partner company gets access to important experience, know-how, and technology, and the foreign company would get a new market to sell into. The Chinese government can provide subsidies that foreign-made goods are exempt from, creating an implied tariff on the foreign goods. Globally, the Chinese develop influence and strategic access with the Belt and Road Initiative. The initiative is funded by several entities within China, including the Chinese Investment Corporation, China’s sovereign wealth fund.

Rather than adopting Chinese policies directly, the U.S. should seek to understand them and adapt what works best for the local market and political culture. The U.S. appetite for intervention in the economy is lower. Its average level of development and wages are higher. The U.S. also has a smaller labor pool and is less industrialized. To get on a level playing field, the U.S. needs to move in China’s direction. A sovereign wealth fund with a broad remit to support strategic U.S. industries is an important early step.

There are hopeful signs that this is what the Trump administration is aiming at. On February 12, news broke that the White House may be pushing TSMC, the Taiwanese semiconductor company that makes the most advanced AI chips, into a joint venture with Intel to avoid U.S. tariffs. The scenario is almost identical to the Chinese technology transfer policy. To compete on the global stage, it’s apparent that the tools we have used in past decades are not up to the job. The good news is that we can just create new tools.

To successfully do so, we have to design around some limitations of the U.S. system. Leadership can change every four years, and, without fail, every four years the President and much of the legislature are up for reelection. For the half of the country that’s upset about the President at any given time, this is a godsend. But for actually accomplishing anything, it’s a predictable disaster.

At the scale of a country, some problems simply can’t be solved in four, or even eight years, no matter how energetic the effort. Real solutions might take ten, fifteen, or twenty years of consistency, proceeding in fits and starts, measuring results and adjusting tactics. Our international competition understands this, but outdated U.S. institutions haven’t caught up.

We typically just let these problems fester, or we try something for a few years and when the next election cycle comes, if it hasn’t shown progress, it becomes a political liability. If anything, it seems the U.S. is becoming less forward-looking over time. In addition to the ballooning debt, public investment in infrastructure as a share of GDP has fallen by 40% since 1970.

Deploying large volumes of capital is necessarily a long-term project: investments at the scale intended by the Trump administration are investments that can’t be unwound in a few months or even a few years. Investment in infrastructure; investment in factories; investment in new energy generation and distribution; investment in frontier technology; these are all long-term commitments to the improvement of the country that a sovereign wealth fund with a long-term perspective could undertake.

There are also many investment opportunities that are only available to the government. Lutnick’s proposal for the government to get an equity stake in private companies that have large government contracts is a perfect example. Other investments, like the rumored TSMC-Intel partnership, might require delicate coordination with trade or diplomatic officials. None of these is possible with the institutions we have now. A sovereign wealth fund could unlock these latent opportunities.

Implementing a U.S. Sovereign Wealth Fund

To realize this potential, the administration must design strong oversight, flexible staffing and organization, and set clear goals for the fund. There is fortunately no shortage of examples to learn from, reason about, and adapt to the U.S.’ unique situation.

The Santiago Principles, developed by a working group linked to the International Monetary Fund, are the underlying doctrine of dozens of sovereign wealth funds around the world, aiming for professionalism and transparency. Existing government-linked investment funds like In-Q-Tel—the intelligence community’s venture capital arm—have experience supporting innovative technology. Development finance entities like the U.S. International Development Finance Corporation have similar experience on a national scale. Even corporate development and strategic investment groups in the private sector have relevant expertise.

The goals of the fund need to be clear enough to be easily understood by the fund staff, investment targets, and the public at large. I propose four goals broadly consistent with those found in the executive order, and broad enough to give the fund a wide remit:

1. Rebuild the productive infrastructure of the United States
2. Catalyze major technological, scientific, and industrial leaps
3. Support the federal government in getting the best possible deal in large transactions
4. Generate financial returns

For the sake of argument, let’s assume these are the goals set. Where does this leave the governance of the fund? How do you set up a massive pool of public capital that is responsive to the needs of the country, but also aloof from political meddling? The answer is that you can’t, not fully.

A sovereign wealth fund is inevitably a political creature. After all, one person’s political meddling is another’s thoughtful coordination. Still, the administration could create an independent Board of Governors that sets the fund’s goals, hires and fires fund executives, and monitors performance. The initial board will be critical, as it will set the tone for the organization, outline its goals, and color public perception of the fund.

The governors should be people with lots to lose and little to gain, who aren’t political operatives or major donors. An ideal board might consist of eminent retired financiers, and a couple out-to-pasture diplomats from each side of the aisle. Keeping this group highly patriotic and relatively non-partisan is a key task for ensuring the fund has the credibility to survive political changes. Staggering terms for the board, such that they do not all turn over at once and giving them long—but not lifetime—appointments are other mechanisms that would avoid undue political influence.

We want the best people in the world staffing the fund itself, and not out of charity, or goodwill, or even patriotism. They should be there to win. Accordingly, the people running the fund should have the opportunity to become rich doing so. The administration should be explicit and unapologetic about this. Private fund managers receive enormous compensation when they are successful. Attracting the best managers will be expensive. So be it. As in the private sector, if managers fail to perform over too long a period of time, they must be replaced. Achieving this will be a politically costly argument to make, but necessary for success.

What the fund invests in, and how those investments perform, will be the ultimate test of whether it is a success. The fund should start with goals set by its board of governors. Working backwards from those goals, the fund’s executives can set specific strategies and targets.

To rebuild the country’s infrastructure, the fund might invest directly in large infrastructure projects, join existing infrastructure funds, or anchor newly-created external funds. The fund might also collaborate with Congress to craft enabling legislation, or a set of special privileges that, if granted, would greatly simplify the land acquisition, permitting, and completion of projects. Inefficiency in each of these steps has led to significant cost increases for building new things in the U.S. A sovereign wealth fund could become a vocal supporter of legislation that streamlines the construction of badly-needed new infrastructure.

The government already has experience related to the second goal, catalyzing major leaps in science, tech, and industry. Programs like DARPA and ARPA-E, and government-related entities like In-Q-Tel, have supported the creation and commercialization of transformative technology ranging from the Internet to mRNA vaccines. The fund could pick up where these programs leave off, by buying minority equity stakes in companies building products based on government-sponsored research. This would help the government secure some return on its vast fundamental research budget.

Depending on the size of the fund, however, direct investments could become unwieldy. Luckily, there is already a very active investment ecosystem supporting new technology companies. The U.S. fund could back existing funds that invest in companies in specific areas of interest, like manufacturing, robotics, and heavy industry.

A serious challenge for real-world technologies relevant for manufacturing and heavy industry is getting the first few instances of the new technology built. Known as “first-of-a-kind” projects, these are critical preliminary steps to testing and validating new real-world technologies. Generally, profitable legacy companies are unwilling to invest millions or tens of millions of dollars into an unproven technology. Most venture capital firms won’t either, though this is beginning to change. By working with investors that have experience in this area, and expanding the pool of capital available to build first-of-a-kind technologies, the fund could accelerate the reindustrialization of the country.

To help the government get the best possible deal in large transactions would require a high degree of coordination between the fund and government entities like the Office of Management and Budget or the General Services Agency. We can roughly divide the opportunities to get a “good deal” into situations where the government is buying something, and where it is selling something. Lutnick’s proposal of getting equity incentives when the government makes large purchases is a good example of the former. As to the latter, the sovereign wealth fund could become the default manager of U.S. government assets that are no longer needed.

The government holds trillions of dollars of assets on its balance sheet, much of which are administered by agencies according to law and regulation. The sovereign wealth fund could take over management of assets that are no longer needed, and manage them—selling, leasing, encumbering, or holding—for the long-term benefit of the taxpayer. The government may have an excess of such assets in the near future, if the efforts of the Department of Government Efficiency are successful.

In the end, the success of a U.S. sovereign wealth fund hinges on its design, insulation from partisanship of alternating administrations, and the expertise of its leaders. With the right framework, the fund could leverage the nation’s resources to support vital industries, fuel technological progress, and rebuild public trust through concrete accomplishments.

Proper oversight and accountability could help keep the U.S. competitive on the global stage, showing citizens that the government can act effectively on their behalf while keeping that same government transparent to them. Without these elements, the fund risks becoming a political tool that undermines public confidence. If the Trump administration sets up the sovereign wealth fund for success rather than condemning it to failure through convenient political compromise, it would be among the first examples of the kind of new political culture and statecraft the U.S. so desperately needs to navigate this century.