Trump orders creation of US sovereign wealth fund, says it could buy TikTok

WASHINGTON – US President Donald Trump signed an executive order on Feb 3 ordering the creation of a sovereign wealth fund within the next year, saying it could potentially buy the short-video app TikTok.

If created, the sovereign wealth fund could place the US alongside numerous other countries, particularly in the Middle East and Asia, that have launched similar funds as a way to make direct investments with government dollars.

The text of the executive order was sparse on details, and simply directed the Treasury and Commerce departments to submit a plan for such a fund within 90 days, including recommendations on “funding mechanisms, investment strategies, fund structure and a governance model”.

Typically, such funds rely on a country’s budget surplus to make investments, but the US operates at a deficit. Its creation also would likely require approval from Congress.

“We’re going to create a lot of wealth for the fund,” Mr Trump told reporters. “And I think it’s about time that this country had a sovereign wealth fund.”

He had previously floated such a government investment vehicle as a presidential candidate, saying it could fund “great national endeavours” like infrastructure projects such as highways and airports, manufacturing, and medical research.

Administration officials did not say how the fund would operate or be financed, but Mr Trump has previously said it could be funded by “tariffs and other intelligent things”.

Treasury Secretary Scott Bessent told reporters the fund would be set up within the next 12 months.

“We’re going to monetise the asset side of the US balance sheet for the American people,” he said.

“There’ll be a combination of liquid assets, assets that we have in this country as we work to bring them out for the American people.”

One approach would be to convert the US International Development Finance Corporation (DFC) to function similarly to a sovereign wealth fund, which the Trump administration reportedly considered in recent months, Bloomberg News reported.

The DFC is a government agency that currently partners with private parties to finance projects in the developing world.

Mr Trump announced on Jan 31 that he was nominating Mr Benjamin Black to head that development agency.

Mr Black, a managing partner at investment firm Fortinbras Enterprises, is the son of Mr Leon Black, the co-founder of asset management firm Apollo Global Management.

The Biden administration was also considering establishing such a fund prior to Mr Trump’s election in November 2024, according to The New York Times and Financial Times.

But precisely how such a fund would be structured, and funded, remained unclear.

Several experts said Congress would likely need to authorise new funding given the lack of an existing surplus to tap. The order directed officials to review any need for legislation.

Ms Clemence Landers, a former Treasury official who is now with the Centre for Global Development, said there has been talk of repurposing the DFC but setting up such a fund would require Congress to approve it.

“Obviously you can’t establish an institution by executive order and more to the point is you can’t fund an institution by executive order,” she said.

Investors said the news came as a surprise.

“Creating a sovereign wealth fund suggests that a country has savings that will go up and can be allocated to this,” said Mr Colin Graham, head of multi-asset strategies at Robeco in London.

“The economic rules of thumb don’t add up.”

There are more than 90 such funds across the world managing over US$8 trillion (S$10.8 trillion) in assets, according to the International Forum of Sovereign Wealth Funds.

Numerous US states, including Alaska, Texas and New Mexico, also have their own wealth funds, which help fund various priorities, including education and tax relief. They frequently rely on revenue raised by natural resources, like oil or land.

In another surprise twist, Mr Trump suggested the wealth fund could buy TikTok, whose fate has been up in the air since a law requiring its Chinese owner ByteDance to either sell it on national security grounds or face a ban took effect on Jan 19.

Mr Trump, after taking office on Jan 20, signed an executive order seeking to delay by 75 days the enforcement of the law.

He has said that he was in talks with multiple people over TikTok’s purchase and would likely have a decision on the app’s future in February.

The popular app has about 170 million American users.

“We’re going to be doing something, perhaps with TikTok, and perhaps not,” he said.

“If we make the right deal, we’ll do it. Otherwise, we won’t... We might put that in the sovereign wealth fund.” REUTERS