The executive decree to create the first American sovereign fund aroused a debate on its governance, its transparency and its potential impact on the world markets.
President Donald Trump announced last week the creation of the first American sovereign fund. He had promised during his campaign to pursue such a policy, but this time, he formalized it with an executive decree leading a plan for the fund to be drawn up within 90 days.
The news on the emerging American heritage fund should not surprise those who follow the trends in sovereign finance. Various developed countries, such as the United Kingdom and France, have explored or executed the idea of a new sovereign fund – despite budgetary challenges – to promote industrial policies, protect national champions from foreign control or make progress the advanced but vulnerable sectors of technology.
The initiative of the American government is also motivated by the recognition that federal assets are underused, creating an opportunity to “monetize the active side of the American balance sheet for the American people”, according to the American secretary of the Treasury, Scott Bessent.
“America is excluded from the dynamic markets and feedback from dynamic capital because we are not a player,” says Chris Campbell, former deputy secretary of the US Treasury for financial institutions during Trump’s first mandate, “and the burden is on the taxpayer to finance the government. »»
The Trump administration has not provided details on the risk profile of the fund, asset allocation, governance structure, transparency or ratio requirements – key factors that generally define a sovereign wealth fund. The news immediately raised skepticism among financial commentators, some of which consider the new initiative as a means of allocating part of the general treasury budget to a discretionary fund controlled by a limited group of initiates. Similar structures have, in other countries, leads to corruption and ineffective investments – as shown by Malaysia and Libya. It remains to be seen whether the details of the new fund will support these concerns.
In all cases, the congress must approve the creation of the fund – a difficult battle, having a long -standing resistance to the privatization of federal assets and services, according to Campbell.
While some American states have their own sovereign funds, such as the Alaska permanent fund, which is funded by state income from natural resources – the United States has no national funds at the federal level . The establishment of such a fund could position the United States as a major player in the international community of sovereign riches – an intriguing change at a time when the agenda “ America First ” of Trump led the country to Remove many global organizations and forums.
One of these forums is the International forum on sovereign funds (IFSWF), which operates under the international aegis of the monetary fund. According to its mandate, IFSWF aims to strengthen the community of sovereign funds through dialogue, research and self-assessment. This unique forum brings together funds from different countries, both developing and developed economies, with transparency and distinctly different asset allocation strategies. However, given the new commercial objective of the American administration, American participation through state and federal funds can support global markets and promote American leadership. The affiliation of a fund with the Federal Reserve will strengthen the participation of the United States in such a forum.
In fact, the announcement alone has already triggered a broader debate on the way in which the United States can take advantage of its resources and financial infrastructure for strategic investments, both at national and international level. In fact, the announcement alone has already triggered a broader debate on the way in which the United States can take advantage of its resources and financial infrastructure for strategic investments, both at national and international level. The discussion could help cultivate investment expertise within the United States government, to develop a pipeline of institutional investment talents and to position commercial investments such as national security and diplomacy tools.