Money For the Rest of Us

What Are Sovereign Wealth Funds and Does the U.S. Need One?

Feb 12, 2025

Discover the fascinating world of sovereign wealth funds and their role in national economies. Learn why the U.S. doesn't fit the traditional mold for such funds and the complexities of making one work. Explore how these funds balance political motivations with the need for high returns, and the potential risks involved, including crowding out other investments. The discussion also touches on global examples, like those in Norway and China, and how they manage substantial national wealth.

19:32

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Quick takeaways

Sovereign wealth funds can serve multiple purposes, including economic stabilization and long-term savings, as demonstrated by successful international examples.

The establishment of a U.S. sovereign wealth fund poses concerns about crowding out private investment and its necessity given current funding practices.

Deep dives

Establishment of a U.S. Sovereign Wealth Fund

In early 2025, an executive order was signed to establish a U.S. Sovereign Wealth Fund aimed at maximizing stewardship of national wealth for American citizens. This initiative seeks to enhance fiscal sustainability, reduce tax burdens, and ensure economic security for future generations. The order emphasizes the need for a comprehensive plan detailing funding, investment strategies, and governance to be prepared by the Treasury Secretary and the Secretary of Commerce. The formation of such a fund raises questions about its structure and financial sources, particularly since the U.S. has historically operated with a trade deficit.

Intro

2min

Understanding Sovereign Wealth Funds

5min

Exploring Sovereign Wealth Funds

7min

Exploring the Viability of Sovereign Wealth Funds in the U.S.

5min

Exploring the U.S. Sovereign Wealth Fund and Investment Resources

1min

The U.S. and the UK each announced they were establishing sovereign wealth funds. We explore the purposes and types of sovereign wealth funds, how they invest, and some concerns with the U.S. establishing one.

Topics covered include:

What are the four types of sovereign wealth funds, and why the U.S. doesn't fit the typical use case
How sovereign wealth funds navigate between politics and generating high returns
Why a U.S. sovereign wealth fund, depending on its size, could crowd out other investment capital, leading to lower investment returns
How the U.S. federal government already invests in its economy without a sovereign wealth fund

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Show Notes

Fact Sheet: President Donald J. Trump Orders Plan for a United States Sovereign Wealth Fund—The White House

A Plan For Establishing A United States Sovereign Wealth Fund—The White House

International Forum of Sovereign Wealth Funds