Is the US getting a sovereign wealth fund?

For any Intriguers who’ve dabbled in the television world of Succession, you’ll recall a memorable scene where the tycoon father, surely inspired by Rupert Murdoch, sends his son (Roman) to the Middle East to secure emergency cash from sovereign wealth funds.

“No strings, and dry powder”, is how the media mogul describes the cash [yes, he uttered another spectacular word we won’t repeat here — hi kids 👋 hi corporate firewalls 👋].

We mention this classic TV moment because this week, Rupert Murdoch, the Middle East, and talk of establishing a US sovereign wealth fund all showed up in the Oval Office.

And here’s why, despite being lost among the various wild headlines, this one is worth your attention.

First, a sovereign wealth fund, you say? 

They’re state-owned funds that invest a country’s surplus cash, often from things like oil and gas exports. So they’re like private funds but with fewer puffy vests, more national objectives, and greater government control (sometimes via a semi-independent board).

But while everyone oohs and ahhs at Norway’s mouth-watering $1.8T fund, and watches with envy as the Saudis dip into their own fund to build trophies cities the size of Belgium, Trump’s move still arguably reverses course on 70 years of economic reasoning.

Think of it like a row-boat: for many in the US and broader West, governments might nudge the rudder to adjust economic course (via rules and regulations), but they’ll traditionally leave both the rudder and oars (growth, investment) to the private sector. Even Communist Party-led China saw sense in letting the people grab more of the oars.

And sure, that balance has ebbed and flowed over the decades — without enough transparency or accountability, for example, there’ve been some spectacular examples of sovereign wealth funds evaporating in a puff of incompetence and corruption.

But things started to change when the US economic row-boat hit an iceberg of sub-prime mortgages in 2008, reminding everyone of the risks of letting corporates have too much free hand over the rudder. So as Western governments bailed out banks, they also started recalibrating their ties with big money.

And more capitals have now seen sovereign funds as part of that new balance… most are still smaller than many pension funds (looking at you CalPERS), but some are now massive — the world’s largest (Norway) alone owns 1.5% of all the world’s listed shares.

Second, sovereign wealth funds as a tool, you say?

We didn’t say that, but sure — ordinarily, if you’re a shareholder who dislikes where a company is headed, you just sell your shares, or maybe become an activist investor heckling at the annual general meeting.

But for a sovereign wealth fund, the owners are theoretically the people who (via their governments) can tie these vast pots of gold to national interests and values. And of course, that means there are always debates around how — or even whether — to define those national objectives. Norway, for example, uses a randomly-selected citizen advisory body.

So then third, what’s Trump’s plan?

Given the above, by the time Trump signed an executive order to create a sovereign wealth fund, the mood around DC was eh, okay, not the worst idea we’ve heard this week.

That’s partly also because it’s not the newest idea, either — two dozen US states already have funds, and Joe Biden’s aides were working on something similar last year.

So what exactly is Trump proposing? The details are now up to his newly minted treasury and commerce secretaries, Scott Bessent and Howard Lutnick, but Trump’s order wants his new fund to: a) promote fiscal sustainability, b) lessen the tax burden, c) establish longer-term economic security, and d) promote US leadership abroad. The first two suggest it’ll make money, while the latter two suggest it’ll pursue national objectives.

Bessent and Lutnick have 90 days to come up with answers to all the obvious downstream questions that then flow, like where the cash comes from (the US runs deficits), where it should be invested, and how it should be managed.

Meanwhile, Trump’s spit-balling with the media also offered a few specifics: he suggested a fund could be capitalised with income from tariffs (though the Canada-Mexico tariffs just got put on hold); and could be used to finance the purchase of TikTok (though the TikTok divest-or-ban law is due to enter force before Bessent and Lutnick are due to submit their report). Lutnick also chimed in, suggesting the US government could take stakes in companies with which it partners (like big pharma).

Anyway, how did we get onto all this? Ah yes, Succession. So maybe let’s leave you with one final quote from the show, shall we? This time, from Roman: “Ooh, nice vest. It’s so puffy. What’s it stuffed with, your hopes and dreams?“

INTRIGUE’S TAKE

We’ve talked before about the way Trump’s campaign pulled together various ‘tribes’ when it comes to America’s approach to the world. The same applies on the economic front, too:

• For libertarians, the very idea of a sovereign wealth fund is heresy — each dollar in the fund is (in their view) a dollar that belongs in an American pocket.
• Liberals and conservatives have differing ideas about the role of government, but might welcome a sovereign wealth fund if it helps advance their values, and
• Populists are really up for anything (including a sovereign wealth fund) if it seems run by — and for — the people rather than some opaque elite.

Now, this is the type of discussion someone might ordinarily have (or yell) on a college campus somewhere, perhaps wearing a beret. But rather than take a side, we just paint the above picture so we can note that really the only US tribe that would — on principle alone — reject a sovereign wealth fund would be the libertarians. But Trump already has them on board via his broader crypto-friendly and deregulation vibes. And you know what? We wouldn’t be surprised if this fund ends up investing in crypto, too.

Also worth noting:

• During last year’s campaign, Trump also suggested a US fund could invest in infrastructure, defence, manufacturing, and medical research.
• Indonesia also passed legislation this week shifting $61B in state assets into a fund reporting directly to President Prabowo Subianto, in an effort to boost growth. Around half the world’s countries already have funds of some kind, including US friends like Australia and Norway, and US rivals like China and Russia.