White House Readying US Sovereign Fund Proposal

Move over, Norway; step aside, Saudi Arabia. The United States wants in on the sovereign wealth fund game.

White House officials are drafting plans to start a US sovereign wealth fund that could invest in national security interests like technology and energy firms, sources told Bloomberg. Donald Trump is on board with the concept too.

Lady Sovereign Liberty

Foreign countries have used sovereign wealth funds — basically, state-owned investment funds with returns that go back to their country — to become major international investors and buttress projects at home. Norway’s $1.7 trillion Government Pension Fund, set up in 1990 to invest oil revenue surpluses, held 1.5% of all the world’s listed companies as of last month. Saudi Arabia’s $925 billion Public Investment Fund has made notable investments abroad, including a 5% stake in Uber, but has also kept nearly two-thirds of its financing activities at home in order to spur local projects and infrastructure.

Details of what an American equivalent would look like remain fuzzy. Sources told Bloomberg the White House has yet to settle on a proposal for the fund’s “structure, funding model, and investment strategy,” while Trump, speaking at the New York Economic Club last week, only said that a US fund should support “great national endeavors.” Some economists, on the other hand, have their doubts:

• Former Treasury secretary and Harvard economist Larry Summers told Bloomberg TV that a wealth fund might make more sense “if you’re Norway or the Emirates — that has this huge natural resource that’s going to run out that you’re exporting — to accumulate a big wealth fund.” He also noted the US trade deficit, which stood at $79 billion in July, would pose an obstacle.
• Jared Bernstein, who chairs the White House’s Council of Economic Advisers, told Bloomberg TV he worries a fund could be exploited by presidents for political purposes, adding he is “very wary of getting involved in any kind of wealth fund.” He also noted US deficits, fueling the $35 trillion national debt, would make financing any fund a challenge.

Game Time: In one notable example of a top government official apparently influencing a wealth fund, the Saudi PIF took 5% stakes in gaming companies Capcom and Nexon — Crown Prince Mohammed bin Salman is reportedly an avid gamer.