From: allin
The Trump administration has unveiled a plan to establish the first Sovereign Wealth Fund for the United States. [00:52:34] This initiative is part of broader discussions on US fiscal policy and debt challenges and industrial policy.
What is a Sovereign Wealth Fund?
A Sovereign Wealth Fund (SWF) is an investment fund owned by a state. They are almost universally anchored by natural resources, such as oil or minerals. Countries like Norway, Saudi Arabia, the UAE, and Australia all possess such funds. [00:52:40] The United States is not typically known for having the oil reserves or mineral wealth common to these nations. [00:52:58]
The Proposal
The proposed US Sovereign Wealth Fund would potentially be anchored by a 50% share of TikTok’s US operations, which former President Trump stated he wanted to obtain by granting a license. [00:53:14] The concept of such a license is currently undefined and has not existed previously. [00:53:23]
The Treasury Secretary and Commerce Secretary have been tasked with developing a comprehensive plan within 90 days. This plan is expected to include recommendations for:
- Funding mechanisms [00:53:40]
- Investment strategies [00:53:42]
- Fund structure [00:53:43]
- A governance model [00:53:44]
Rationale and Support
Chamath Palihapitiya suggests that if assets are “minted” (e.g., TikTok shares, potentially worth $100-150 billion), they should be managed effectively rather than solely focusing on debt reduction. [00:54:04] He proposes a governance model involving five unpaid, sophisticated “Elder Statesmen” (such as David Tepper, Stan Druckenmiller, Ken Griffin, John Doerr, Mike Moritz, or Bill Gross) who are “mega-billionaires.” These individuals would rotate in and out, deploying capital into American companies. [00:54:19]
Antonio Gracias, CEO of Valor Equity Partners, supports the idea for a different reason: the lack of an industrial policy in America. [00:55:22] He highlights that competitors like China have long-term industrial policies backed by significant capital, which enables them to build capabilities like chip fabs domestically. [00:55:27] Gracias views a sovereign wealth fund as a “stealthy way to create industrial policy” in the US, allowing private sector experts to make economically sound yet strategically beneficial investments for the country. [00:55:36] This contrasts with current approaches like the CHIPS Act, where government bureaucrats decide how to spend billions. [00:56:16]
Scott Bessent’s “333 plan” aligns with this, aiming for 3% GDP growth, deficits no greater than 3% of GDP, and 3 million barrels of oil produced domestically. [00:57:16] Palihapitiya notes that the US has energy reserves three times greater than Saudi Arabia across all forms. [00:57:34] An energy-focused industrial policy could generate enormous revenue for the federal government, which could then be banked into a sovereign wealth fund as a “rainy day fund.” [00:58:08]
Concerns and Criticisms
David Friedberg expresses concern that such a fund could make the government “too big” and lead to it competing with private investment firms. [00:58:24] He notes that the government is generally “bad at capitalism” and, given the current $40 trillion federal debt with a 5% cost of capital on 10 to 30-year debt, it is difficult to achieve real risk-adjusted returns. [00:58:51]
Friedberg suggests that the mandate of the SWF should not be to simply invest capital and try to make money, but rather to be a “strategic vehicle for monetization of high-value government assets.” [00:59:37] For example, if the US acquires a 50% equity position in TikTok, it should be managed by a capitalist manager who decides when and how to monetize the asset and return cash to the Treasury to pay down debt. [00:59:46] Similarly, government-seized assets like Bitcoin should be managed by experts to ensure optimal monetization. [01:00:15]
There’s also an opportunity to manage Social Security funds more intelligently, as the program is projected to face bankruptcy in eight years. Instead of owning low-yielding bonds, the Social Security trust could have its capital managed by the SWF to invest in equities for better long-term returns. [01:00:56]