Exploring the Case for a US Sovereign Wealth Fund
In February 2025, Donald Trump announced his intention to establish a US sovereign wealth fund.
The US has never had a sovereign wealth fund. Many other countries do: Norway’s oil fund, now worth $1.6T, invests resource windfalls for future generations. Singapore’s Temasek seeded an entire venture ecosystem. The Gulf states turned “petrodollars” into long-term national wealth. America, despite being the largest economy in the world, has no equivalent.
This may change—and soon.
What is a sovereign wealth fund anyway?
A Sovereign Wealth Fund (SWF) is a state-owned investment fund that manages a nation’s financial assets. Most are fueled by trade surpluses, natural resource revenues (oil in Norway and the Gulf states’ case), or excess reserves. They are generally run by central banks, ministries of finance, or specialized agencies, with mandates ranging from stabilization to future savings to strategic industrial promotion.
But America has never had one. With constant budget deficits, the logic was always if there is no surplus, what is there to invest. Quite the opposite actually, as the States are facing a looming debt crisis where interest payments are over $1T a year and make up almost 20% of federal spending.
The idea here is a little different than the traditional SWF strategy, and if executed could be quite compelling. Instead of funding a sovereign wealth fund with “extra money” from oil or trade surpluses like other countries do, the US is trying to build one out of two other sources:
Industrial strategy investments: when the government gives companies subsidies or contracts (for things like chips, rare earths, or clean energy), it is starting to take equity stakes instead of just handing out money.
Law enforcement windfalls: when agencies seize assets like Bitcoin in criminal cases, the government is now holding and investing those assets instead of selling them off right away.
So in common terms: the US may begin taking money it already spends on big industries, and assets it already seizes through law enforcement, and turning them into investments that could grow over time, rather than just spending or liquidating them. A new take on a SWF, if you will.
Catalyzing Public-Private Partnership
One example is the Department of Defense’s $400 million investment in MP Materials, the only US rare earth producer. By using emergency powers under the Defense Production Act, the
Pentagon became MP’s biggest shareholder and locked in long-term supply contracts for magnets. The move gave Wall Street confidence. Soon after, JPMorgan and Goldman Sachs put in $1 billion to help MP build a new plant in Texas, knowing the government had already de-risked the project by guaranteeing demand.
Intel is another case. Through the CHIPS Act, the government changed how subsidies work. Instead of just giving grants, it took the form of equity that could be converted into ownership. Intel’s massive new chip factory in Arizona faced financing challenges, but the government’s investment signaled that taxpayers would get a share of the upside. That unlocked billions more from private investors and gave the US a stake in a critical industry. Rather than subsidies disappearing into Intel’s operating budget, they became part of what could grow into an “industrial endowment” that can fund future projects.
This is the core dynamic: when the government puts in money and takes equity, it reduces risk and attracts even more private investment.
The strategy is also showing up in other places. In March, the administration announced a strategic Bitcoin reserve, seeded with $5 billion in assets seized from law enforcement cases. By spring, the US held roughly 200,000 Bitcoin, making it the world’s largest government holder. These assets could eventually help build a US-backed digital currency system, supported by new legislation like the Genius Act.
Even TikTok has been pulled into the conversation. Instead of forcing a full sale, the government may take a “golden share,” which would give it veto power over major company decisions. This approach mirrors how Germany has used its state-owned bank KfW to block foreign takeovers of critical infrastructure.
Comparing to University Endowments
If Norway’s model is built on oil, the American version may end up looking more like a university endowment. Take Harvard’s $50 billion fund: donations are invested, the returns grow over time, and future students benefit. In the same way, the US government is starting to build long-term investments out of equity stakes, seized assets, and strategic reserves.
The key point is that endowments are not meant to fix this year’s budget. They exist to build permanent capital that compounds quietly and pays off decades later. For a country dealing with Social Security gaps and heavy debt, that kind of patient growth could make a real difference.
This is where Yale’s story becomes important, because it shows how an endowment strategy can shape entire markets.
The Yale Model and Venture Capital
If Harvard shows the size an endowment can reach, Yale shows how strategy matters. Starting in the 1980s, under David Swensen (best known for creating the Yale Model that pioneered endowment investing in alternatives like venture capital and private equity), Yale began shifting more of its money into venture capital, private equity, and hedge funds. Backing early venture firms such as Sequoia and Kleiner Perkins gave Yale strong returns and turned its endowment into one of the leaders in this space.
Other universities and pension funds later copied what became known as the Yale Model. By putting money into venture funds, Yale not only grew its own portfolio but also supported the rise of companies like Apple, Google, and Facebook. It is a clear example of how steady, long-term investment can help build both financial returns and new industries.
A US sovereign wealth fund could do something similar on a national level. By consistently investing part of its capital into venture, it could grow returns while also supporting the startups and technologies that keep the US competitive.
What Sets the US Approach Apart
Most sovereign funds are run as a single, centralized entity with a clear mandate. The US approach is more spread out and handled deal by deal. Different agencies such as the DoD, Treasury, and Commerce are making investments. It may look less organized than funds like ADIA, the Abu Dhabi Investment Authority, or Temasek, Singapore’s state-owned investment company. But in practice it is similar to how other countries use state capital. Germany, for example, used its development bank KfW to prevent foreign takeovers of key infrastructure, and Ireland’s ISIF combines financial returns with support for local industry. The US is moving in a similar direction, just in a more piecemeal way.
Implications for Venture Capital
For venture capital, the effects could be significant.
A new large investor: Many sovereign wealth funds, such as Temasek (Singapore’s state-owned investment company) and GIC (Singapore’s Government Investment Corporation), are already major investors in venture funds. A US sovereign wealth fund, even if run through several agencies, could become another important backer.
Encouraging private capital: When the government takes an equity stake, it reduces risk for other investors. The MP Materials and Intel cases show how this can work. Once the government is involved, private money is more likely to follow.
Long-term perspective: Sovereign funds and endowments invest with decades in mind. That allows them to support areas like deep tech, advanced science, or infrastructure projects that take longer to pay off than a typical 10-year venture fund cycle.
Support during downturns: Venture capital tends to rise and fall with market cycles. A US sovereign wealth fund could keep investing steadily, even in weaker markets, which would provide stability.
In practice, this could mean clean-energy subsidies being turned into investments in climate startups, chip subsidies flowing into semiconductor companies, or seized Bitcoin being used to back fintech and digital infrastructure projects. Instead of government money being spent once and gone, it could be invested in ways that grow over time.
Looking Ahead
The Trump administration has already signalled bigger ambitions. The $500B Stargate AI infrastructure project, in partnership with OpenAI and SoftBank, could be an anchor investment. The US–Japan Strategic Trade and Investment Agreement pledged $550B from Japan into semiconductors and pharma. The EU deal announced in July may add another $600B in cross-Atlantic capital.
Put together, this has the potential to be a very, very big deal.
The Open Question
The US is carrying more than $37 trillion in national debt, and interest payments alone are now larger than the defense budget. Critics argue that with a debt crisis already here, every spare dollar should go to paying that down. Supporters counter that building a sovereign wealth fund is a way to invest for the future rather than just cover past spending. The real question is whether it makes more sense for America to use its resources to reduce debt today or to plant the seeds of a fund that could grow and support innovation for decades to come. There is no simple answer, but at the pace at which these conversations are happening, we will have an answer sooner rather than later.