Amid all the noise around tariffs this week, President Donald Trump signed an executive order on Monday calling for the creation of a US sovereign wealth fund. According to a statement, the fund is intended to “promote fiscal sustainability, lessen the burden of taxes on American families and small businesses, establish long-term economic security, and promote US economic and strategic leadership internationally.”
Details at this point are scant. The Secretary of the Treasury and the Secretary of Commerce have been given 90 days to develop a plan that would include recommendations for funding mechanisms, investment strategies, fund structure and a governance model.
The federal government directly holds $5.7 trillion in assets and, indirectly, including through natural resource reserves, a far larger sum, the statement said, noting that these could be invested through a sovereign wealth fund for greater long-term wealth generation.
Another US sovereign wealth fund could represent a sizable opportunity for private equity managers. Alaska Permanent Fund Corporation – a sovereign fund at the state level – has a 17.56 percent allocation to the asset class, representing around $14.4 billion. Its fellow SWF the New Mexico State Investment Council was the world’s second-most active investor in venture capital funds last year, with 17 commitments, according to Venture Capital Journal research, behind the European Investment Fund, with 24 commitments. (NMSIC was also the second-most active private equity LP last year, according to affiliate title Private Equity International.) Their international peers, particularly those in Southeast Asia and the Middle East, represent some of the world’s largest private equity investors by quite some distance, PEI reports.
“The Saudi Arabia fund is on the larger side,” Trump noted, “but eventually we’ll catch it.”
Of course, it’s worth noting that this new fund could well be used more strategically than commercially and may, therefore, eschew a traditional approach towards portfolio construction. It’s also important to recognize that – as evidenced by Trump’s whiplash decision to pause the newly announced tariffs on Mexico and Canada this week – policies can change quickly under this administration.
If, however, this administration is indeed serious about creating a fund capable of delivering long-term returns, then history suggests private equity is likely to play a significant role.
Helen de Beer, Katrina Lau and Hannah Zhang contributed to this story
Amid all the noise around tariffs this week, President Donald Trump signed an executive order on Monday calling for the creation of a US sovereign wealth fund. According to a statement, the fund is intended to “promote fiscal sustainability, lessen the burden of taxes on American families and small businesses, establish long-term economic security, and promote US economic and strategic leadership internationally.”
Details at this point are scant. The Secretary of the Treasury and the Secretary of Commerce have been given 90 days to develop a plan that would include recommendations for funding mechanisms, investment strategies, fund structure and a governance model.
The federal government directly holds $5.7 trillion in assets and, indirectly, including through natural resource reserves, a far larger sum, the statement said, noting that these could be invested through a sovereign wealth fund for greater long-term wealth generation.
Another US sovereign wealth fund could represent a sizable opportunity for private equity managers. Alaska Permanent Fund Corporation – a sovereign fund at the state level – has a 17.56 percent allocation to the asset class, representing around $14.4 billion. Its fellow SWF the New Mexico State Investment Council was the world’s second-most active investor in venture capital funds last year, with 17 commitments, according to Venture Capital Journal research, behind the European Investment Fund, with 24 commitments. (NMSIC was also the second-most active private equity LP last year, according to affiliate title Private Equity International.) Their international peers, particularly those in Southeast Asia and the Middle East, represent some of the world’s largest private equity investors by quite some distance, PEI reports.
“The Saudi Arabia fund is on the larger side,” Trump noted, “but eventually we’ll catch it.”
Of course, it’s worth noting that this new fund could well be used more strategically than commercially and may, therefore, eschew a traditional approach towards portfolio construction. It’s also important to recognize that – as evidenced by Trump’s whiplash decision to pause the newly announced tariffs on Mexico and Canada this week – policies can change quickly under this administration.
If, however, this administration is indeed serious about creating a fund capable of delivering long-term returns, then history suggests private equity is likely to play a significant role.
Helen de Beer, Katrina Lau and Hannah Zhang contributed to this story
