On Monday, U.S. President Donald Trump signed an executive order directing the creation of a sovereign wealth fund within the next year. The president suggested the fund could be used to secure a stake in TikTok, with the goal of profiting from a potential sale of the Chinese-owned social media platform.
Trump’s move follows an earlier order, signed on his first day in office, which set a deadline of early April for TikTok to find an approved American partner or buyer. The president reiterated his desire for the U.S. to take a 50% stake in TikTok, which is owned by China’s ByteDance.
In a meeting in the Oval Office, Trump referred to TikTok as a potential asset for the U.S. sovereign wealth fund, a state-owned investment vehicle used by governments to manage national savings and invest in foreign assets. The move to create the fund and possibly acquire part of TikTok highlights the growing tensions between the U.S. and China over technology and trade.
“We have tremendous potential,” Trump said while signing the order from the Oval Office on Monday. “I think in a short period of time, we’d have one of the biggest funds.”
Understanding Sovereign Wealth Funds: What They Are and How They Work
A sovereign wealth fund (SWF) is an investment vehicle owned by a country, designed to manage and invest the nation’s surplus wealth for the benefit of its citizens and future generations. These funds typically operate as either an investment account or a development tool, and they often aim to provide financial benefits for the long-term stability and prosperity of a nation.
Unlike pension funds, which are intended to meet the individual needs of retirees, SWFs invest for the collective good of the country. They generally invest in a range of financial products, including buying stakes in companies, which can generate returns that fund government budgets, social programs, or other national projects. As of now, there are over 90 sovereign wealth funds worldwide, collectively managing over $8 trillion in assets, according to the International Forum of Sovereign Wealth Funds (IFSWF). Some examples include Saudi Arabia’s Public Investment Fund, the China Investment Corporation, and Norway’s Government Pension Fund.
How Is A Sovereign Wealth Fund Funded?
Sovereign wealth funds are typically funded through a country’s budget surplus, which is then used for investments. Many SWFs, especially in countries with significant natural resource exports, are largely funded by the revenue from the sale of commodities like oil, natural gas, metals, and minerals. According to the IFSWF, around 60% of SWFs are financed through revenue from natural resources.
Details on how the proposed U.S. sovereign wealth fund would operate remain vague. Treasury Secretary Scott Bessent indicated that the goal would be to monetize existing U.S. government assets “for the American people.” President Trump has also suggested that revenue from tariffs on imports could serve as a source of funding for the proposed U.S. fund. However, specifics regarding financing and operations have not yet been fully disclosed.