• President Trump signed an executive order outlining a plan for establishing a United States Sovereign Wealth Fund on February 3, 2025

• While the details are few, it’s clear that national security and economic strength are priorities of a future SWF

• There are potential problems, however, and referring to Ray Dalio’s principles offers a guide to effective SWF management to promote its long-term viability

Just a few weeks into his second term, President Trump ordered the creation of a US sovereign wealth fund (SWF). So far, 2025 has been a deluge of political noise and real change, so parsing out what’s likely policy and what topics are used as political gamesmanship has been difficult, particularly for investors who have other macro data points to consider. It is also unclear how the SWF would be funded, but it’s reasonable to assert that tariff revenue would find its way into the mechanism. 

Now, Trump opponents and perhaps even fiscal hawks on the right might scoff at the notion of a wealth fund in light of the country’s massive and growing debt and unsustainable annual budget deficits. At the same time, former President Biden reportedly explored an SWF to improve the country’s global competitiveness. 

But what is an SWF? Is it really something the US could and should pursue? And, for investors, what are the macro implications? Let’s unpack this hot topic that could be part of the political and economic discourse for the next four years and beyond. You might just learn a little more about your personal investment philosophy in the process. Applying this knowledge to a global macro portfolio can help you grow your wealth no matter the economic situation.

What is a Sovereign Wealth Fund?

An SWF is a state-owned investment fund that holds national reserves to invest in a diversified portfolio of assets and securities. It might own some of the same things you have in your brokerage account or IRA. Stocks, bonds, cash, real estate, commodities, gold, and cryptocurrency could all be part of a Trump SWF. It’s speculation at the moment, and we’ll all just have to wait and see how the topic unfolds. 

Bigger picture, an SWF is a sign of economic might; there are over 90 such funds around the world that manage a collective $8 trillion of assets. It sounds like a lot of money, but that’s less than the value of Apple (AAPL), Microsoft (MSFT), and NVIDIA (NVDA) combined. Moreover, the global stock market is valued at roughly $130 trillion, according to the Securities Industry and Financial Markets Association (SIFMA), and the bond market is even bigger at just shy of $150 trillion. Thus, SWFs are big, but they are just one vehicle for asset allocation.

The largest SWFs today include Norway’s Government Pension Fund Global, China’s Investment Corporation, China’s SAFE Investment Company, Abu Dhabi’s Investment Authority, and maybe most notable, Saudi Arabia’s Public Investment Fund. While each country has distinct purposes for an SWF, the funds are typically funded by excess revenues from natural resources (e.g., oil revenue in Norway and Saudi Arabia) or foreign exchange reserves. The asset pools are thought to:

1. Promote economic stability

2. Build wealth for future generations

3. Protect a country from fiscal shocks

Top 10 Largest SWFs

Country/RegionFund NameAssets (Billions $)InceptionOriginNorwayGovernment Pension Fund Global1,7381990Oil & GasChinaChina Investment Corporation1,3322007Non-commodityChinaSAFE Investment Company1,0901997Non-commodityUAEAbu Dhabi Investment Authority1,0571976Oil & GasKuwaitKuwait Investment Authority1,0291953Oil & GasSaudi ArabiaPublic Investment Fund9251971Oil & GasSingaporeGIC Private Limited8001981Non-commoditySingaporeMonetary Authority of Singapore6001971Non-commodityQatarQatar Investment Authority5262005Oil & GasHong KongExchange Fund (Hong Kong)5141935Non-commodity

Source: Wikipedia

The US is the largest economy in the world with arguably the best business climate for free-market enterprise to bask in, but we don’t have an SWF. Additionally, lower-48 oil production and dry natural gas production are near record highs along with the country possessing vast shale regions of natural gas. US energy pipelines, such as the Keystone Pipeline, could be a significant revenue source as demand for energy transportation rises. Creating an SWF makes sense considering these economic factors.

US Lower-48 Oil Production: Record High

Source: EIA

US Dry Natural Gas Production Has Doubled Since 2005

Source: EIA

A Vast US Natural Gas Pipeline Infrastructure

Source: EIA

Why Now? The Macro Context

It's easy to see how an SWF would fit into Trump’s America First agenda. Rather than sending money abroad that ultimately just seems to line the pockets of foreign adversaries, an SWF could be used more thoughtfully and strategically. As with your own investments, a portfolio is constructed only after carefully assessing your risk tolerance and return objectives. The federal government is not known for diligence, prudence, and steadfastness, though. President Trump would likely aim to instill such discipline in managing the country’s revenue.

Just take a look at the early successes of the Department of Government Efficiency (DOGE). With more than $1 billion in daily spending cuts, an SWF would perfectly complement the renewed focus on expense management in Washington. Now would seem to be the ideal time to construct an SWF—the president has surrounded himself with experts from the financial sphere. It’s also possible that Trump could call on asset managers and bankers who have voiced support for the new administration; JPMorgan Chase CEO Jamie Dimon might be on the hypothetical investment committee. 

DOGE All-In on Cutting the Fiscal Fat

Source: Fox News

That’s all speculation at this point, but there’s no debate that the US is at a critical economic juncture. As the national debt ticks closer to $40 trillion, the post-pandemic recovery has lifted our country ahead of many others in recent years, but lingering inflation pressures, higher interest rates, unsustainable deficits, and heightened geopolitical tensions are problems inherited from the Biden administration. 

The macro waters are troubled, and the US faces long-term structural challenges, including soaring interest owed on the national debt, aging infrastructure, and the competitive imperative to win the AI race. 

Ray Dalio’s Principles and the Case for a US SWF

Once again, we can look at Ray Dalio’s principles of macroeconomic cycles and debt dynamics for insights into why an SWF could be a strategic tool to promote US national and financial security. An SWF would also help ensure that the dollar remains the world’s reserve currency. 

Given high debt levels, we may be in the late stages of a long-term debt cycle, putting our top standing among global powers at risk. In this scenario, Dalio argues that it’s critical to effectively manage debt levels and create sustainable wealth sources to avoid economic decline. 

The Dollar’s Share of FX Reserves Has Fallen

Source: J.P. Morgan, IMF COFER

An SWF could serve as the ideal mechanism to address these macro challenges. Real-world business leaders and portfolio managers are equipped to invest judiciously in productive assets to generate returns that can reduce the national debt, fund infrastructure projects, and provide revenue sources for future generations. Rather than taxing citizens and potentially causing financial hardship for families, an SWF could be an asset to help America thrive by harnessing our current advantages:

1. World-leading technological innovation

2. Natural resource endowments (oil & gas)

3. Reserve-currency status

So, why now? An SWF could act as a counterbalance to the aforementioned risks given our structural advantages. A large wealth pool could be instrumental in transitioning the US economy from a debt-reliant system to a self-sustaining one.

How a US Sovereign Wealth Fund Could Work

It might sound complicated for a $30 trillion economy to create and operate an SWF, but it really comes down to three fundamental steps:

1. Setting Investment Objectives

Allio comes at the idea of an SWF from a portfolio manager’s perspective. Before fundraising occurs, asset allocators must determine risk and return objectives. A national wealth fund has the benefit of an infinite time horizon, which means long-term projects can be undertaken without needing immediate liquidity—tax revenue and Treasury issuance can fund near-term fiscal requirements.

A US SWF could focus on modernizing infrastructure, such as the dated transportation system and aging energy grid, setting the country up for success in the new world of AI. But this is where politics enters the scene—the left, the next time they get in power, will seek to commandeer the SWF by funding poor-ROI green energy policies. This is a key risk of the SWF. Effective objectives ensure that only strategic investments are made that will ensure the US remains the dominant economic power on the global stage. 

President Trump could even use an ample SWF to acquire stakes in key international regions, like Greenland, as well as the Gaza Strip and Panama Canal. Future administration must adhere to Dalio’s principles of diversification by spreading investments into uncorrelated assets to protect the country from a single geopolitical risk. 

If the Bridgewater Associates founder had a seat on the US SWF Investment Committee, he would probably advocate for an all-weather portfolio. He may also put forth a strategy focused on enhancing US long-term financial health and international leadership by improving productivity and creating a positive feedback loop of economic growth.

2. Funding the SWF

Like a startup fund, capital is needed to launch a strategy. The US could fuel the SWF with revenue from crude oil and natural gas, perhaps partnering with major companies in the Energy sector like Exxon Mobil (XOM) and Chevron (CVX). Redirecting a portion of US energy production revenue into an SWF is a ‘natural’ beginning. 

From there, partially privatizing the SWF could serve two benefits: (1) bringing in more capital, and (2) promoting buy-in from the private sector. Additionally, trade surpluses at the industry level could be deposited into the fund. Of course, President Trump might hypothetically look to put tariff revenue into an SWF, too.

3. Wealth Redistribution and Public Benefit

History underscores the danger of policing the world and deviating from one’s fundamental strengths. The best immediate use of a US SWF would be to shore up our own finances. Profits from investments should go toward stabilizing Social Security, bringing the national debt down to a more manageable level relative to GDP, and ensuring that state and local governments have the resources they need to operate. 

A successful SWF would keep tax rates at historic low levels, thereby fueling entrepreneurial spirit and higher economic output. It can also help reduce the national debt if the fund is properly managed, earning an annual return in the mid-to-high single digits. Even a modest 7% growth rate would aid in alleviating the debt burden. Once that’s stabilized, focusing on high-ROI projects could be the primary aim.

Challenges and Considerations: What Could Go Wrong?

The White House announced a plan for establishing a US SWF on February 3, 2025. The order instructs the Secretary of the Treasury and the Secretary of Commerce to jointly submit a plan to President Trump within 90 days, including recommendations for funding mechanisms, investment strategies, fund structure, and a governance model.

Political Riffs

The order was made without the consultation of Congress or members of the opposition party—which naturally creates problems down the road. A primary challenge is the divided political climate; surely those on the left will stand firm against the SWF simply because it was President Trump’s idea. 

Democrats may look to block measures that divert funds into the wealth pool, maybe suggesting that the SWF comes at the expense of (not the benefit of) the lower and middle class. Agreeing on financial priorities would be difficult: Infrastructure or clean energy? Domestic investments or international acquisitions? Small-business incentives or entitlement program replenishment?

Governance and Transparency

It's easy to look decades down the line and find the SWF as a mess of federal government corruption and financial abuse. Thus, effective governance is critical to the SWF’s success, and that’s why a public-private partnership of expert academics and business leaders may be the right management approach. The SWF must be careful not to crowd out the private sector either. For instance, taking over TikTok could be in the best interest of national security, but doing so could discourage companies from making job-creating investments.

Stewardship is the cornerstone of its success, so the initial Investment Policy Statement must be carefully crafted and adhered to. History is replete with examples of SWFs gone awry due to mismanagement and political interference—transparency, simplicity, and accountability are keys. Unfortunately, those are not hallmarks of the federal bureaucracy, so governance is a major long-term risk to the SWF’s sustainability.

Where’s the Money?

Unlike Norway or some Middle East nations, the US does not have a surplus-driven economy. We use much of our oil and gas production and import goods that other countries can produce more cheaply. Certainly, part of the SWF could be funded with oil and gas revenue, but alternative funding sources would be required. 

Bond issuance, a portion of tax revenue, and optimizing existing federal assets are possible liquidity sources, but each option has its trade-offs. Adding even more supply to the Treasury market would likely cause interest rates to rise further, raising taxes or taking from other federal programs would be met with a political firing squad, and the extra amount of cash that could be squeezed from existing federal infrastructure is probably paltry.

The Bottom Line

An SWF has the potential to make America’s economy stronger. The country’s national debt has ballooned in recent years, even amid a period of high GDP growth. Fiscal responsibility has gone out the door, as evidenced by record-high budget deficits and poor investments by the federal government. 

President Trump’s order to create a Sovereign Wealth Fund is an intriguing move, but also one that’s met with intense criticism from the left. Ambitious and contentious, the Feb. 3 executive order marks a possible shift in how the US approaches wealth creation and public investment. Viewing it through the lens of Dalio’s principles—diversification, countering debt cycles, and promoting economic stability—the SWF could work to position the US for long-term prosperity.

To be successful it’s imperative to comprehensively understand how changes in the economy and macro landscape impact your portfolio.  Allio’s innovative Macro Dashboard lets you assess your investment strategy in the same way a sovereign wealth fund does.