Trump creates sovereign wealth fund

President Donald Trump Monday signed an executive order that will start the process of creating the country’s first-ever sovereign wealth fund, a proposal he had floated on the campaign trail.

Trump tasked Treasury Secretary Scott Bessent and Commerce Department nominee Howard Lutnick with creating the fund. The White House has not detailed how the fund would be capitalized, although Trump has previously said tariffs could be part of it.

“It’s a very exciting event. We’re going to have a sovereign wealth fund, which we’ve never had,” Trump said Monday from the Oval Office. “We have tremendous potential in this country, a lot of options.”

The proposal is the latest idea for a national fund or bank that would be used to finance U.S. infrastructure that goes beyond the traditional municipal bond market.

Pitching the proposal on Sept. 5 to the Economic Club of New York, Trump said the fund would be used in part to build U.S. infrastructure. “We will build extraordinary national development projects and everything from highways to airports and to transportation, infrastructure, all of the future,” he said.

Bessent, who along with Lutnick joined the president at the White House for the signing, said it would take 12 months to set up the fund. The fund “would monetize the asset side of the U.S. balance sheet,” he said, adding they would study best practices from other countries’ funds when creating the U.S. one.

“The extraordinary size and scale of the U.S government and the business it does with companies should create value for American citizens,” Lutnick said.

Twenty-one states, including Alaska, Texas and Montana, have successful sovereign wealth funds and many other countries have national funds, but the U.S. has never had one. For international funds, infrastructure has become an increasingly popular investment over the last several years, according to the International Forum of Sovereign Wealth Funds.

“In 2018, [funds’] direct investments in infrastructure accounted for $6 billion, representing 13% of the annual total. However, by 2022, this figure had risen to over $17 billion, or 25% of total investments,” the IFSWF said in its 2022 review.

But most of those investments are in existing, cash-generating assets, and not new projects, Michael Likosky, a partner at strategic advisory firm Results who has worked for years on national, state and international infrastructure banks, told The Bond Buyer in a previous interview. Likosky said money isn’t traditionally the obstacle for large infrastructure projects; it is political will.

Congress may have to approve the fund before it can be formed.