The United States is considering the establishment of a sovereign wealth fund, following the example of countries like Norway. Sovereign wealth funds are state-owned investment funds that manage a country’s surpluses, with the aim of safeguarding and building financial wealth for future generations. Norway’s sovereign wealth fund made an impressive 16 per cent return in 2023, prompting interest in similar initiatives in the US.

However, unlike some countries that fund their sovereign wealth funds with revenues from natural resources, the US faces challenges in finding the necessary funds. With a deficit close to 7 per cent of GDP and debt levels approaching 100 per cent of total output, the US does not have the same surplus resources as other countries with established sovereign wealth funds.

The Trump administration has proposed funding the sovereign wealth fund by leveraging the $5.7 trillion in assets held by the Federal government. This could involve selling federal lands, gold reserves, and seized bitcoins to generate the necessary funds. Another option is to issue debt to finance investments, although this carries risks and raises concerns about risk management.

In terms of asset allocation, a US sovereign wealth fund could potentially follow a similar balanced portfolio to Norway’s fund, with investments in equities, bonds, real estate, and renewable energy infrastructure. President Trump has suggested that the fund could finance national endeavors, with speculation that assets like the social media app TikTok could be included in the fund.

Meanwhile, the UK has already taken steps towards establishing a National Wealth Fund, which combines existing institutions to focus on key industries and infrastructure projects. However, concerns have been raised about the effectiveness of the fund, with some economists questioning its size, administrative burden, and approach to promoting the green transition.

Overall, the idea of a sovereign wealth fund in the US presents both opportunities and challenges. While it could potentially lessen the tax burden and promote economic and strategic leadership, careful planning and management will be essential to ensure its success.