USA Sovereign Wealth Fund

Via executive order on 02/03/2025 President Trump created a USA sovereign wealth fund. Details are scant thus far (funding mechanism, investment strategy, fund structure and governance structure are all open items), to be sorted in the next 90 days. The fund has not been named, as at the time of writing, USAOC is an educated guess, USOC perhaps more likely, given the potential AOC trademark “infringement”.

pop·​py·​cock ˈpä-pē-ˌkäk

Synonyms of poppycock

: empty talk or writing : nonsense

Sovereign Wealth Funds - There are almost 100 SWFs operating globally, managing in excess of US$8 trillion.

Norway’s Government Pension Fund Global (GPFG) with US$1.4tln in AUM (assets under management) is the largest in the world, funded in large part by Norway’s oil & gas revenues. The fund invests in global equities (approx. 1.5% of each listed equity), bonds, real estate and other assets. Norway’s GDP is approximately $500 million, hence GPFG is 3.6X Norway’s GDP.

SWFs are typically funded through natural resource revenues (as with GPFG), budget surpluses, foreign exchange reserves, privatization proceeds and via ongoing investment returns.

China Investment Corp (CIC) has AUM of $1 trillion and manages a significant portion of China’s foreign exchange reserves. CIC invests in varied global assets, including public and private equity, real estate and infrastructure.

Pension Plans

Japan’s Government Pension Investment Fund (GPIF) is the world’s largest in terms of AUM at US$1.7 trillion. Given the horrid demographics in Japan, this funded pension would be out of money inside of 5 years, without the contribution from gainfully employed Japanese.

Canada’s CPPIB (Canada Pension Plan Investment Board) is the largest in Canada at $600 million in AUM, with the top 10 pension funds in Canada managing $2 trillion.

USA

USA’s Social Security program is a largely unfunded program, funded on a pay-as-you-go basis through FICA (Federal Insurance Contributions Act) which taxes earnings (6.2% for Social Security and 1.45% for Medicare, with an employer match for the same %). Payroll taxes for the USA total $1.6 trillion per year.

The USA has not run a budget surplus since the year 2000 (a 1/4 century ago), hence this is not a funding source for the new USOC. The current US national debt stands at $36.4 trillion, 121% of the US’s $30 trillion GDP. At the current pace, $1 tln is being added every 100 days. Debt service (interest cost) is now > $1 trillion per annum, above the spend on defense at $878 bln.

USOC sizing

Scott Bessent, US Secretary of the Treasury (net worth 1/2 billion USD) has hinted as some features of the USA’s inaugural SWF. Trump, perhaps in jest, has hinted at at housing TikTok within the fund. Even at a discounted valuation TikTok is worth $100 billion (fire sale). Even at $5 trillion USA SWF inception sizing (16.7% of USA GDP), a 2% concentration in a recent Chinese “trojan horse” might be deemed excessive, especially in the early innings of a newly formed SWF.

The DOGE clock, which has been recently added to the US Debt Clock, stands at $86bln. >30k civil servants have thus far accepted the severance offer from the new administration.

There is a great gap between $2 trillion and $86bln! Privatization of assets has been mentioned. Potential equity stakes in significant service providers in the government’s supply chain has also been floated. A “shadow” municipal bond market where high net worth individuals could pre-fund taxes (presumably as a discount) via investing in the SWF.

The Official Trump meme coin trades at $17.18 today ($3.4bln mkt cap, primarily owned by President Trump). Early adopters are well off-side on their positions, clearly. Trump’s meme coin hit a high of $75.35 on 01/19/0225 and is down 77% from that high print. It is estimated that $100 million in fees (bid-offer spread primarily) have been extracted from smaller investors in this instrument. Binance has controlled 23% of the turnover in the last 24 hours. Donald Trump Media & Technology Group Corp is 61% off recent highs at $30.86/share, still sporting a market cap of $6.7bln.

The World may not be quite ready for the “Buy Now, Pay Later” SWF.

JCG