Superb wealth funds are some of the most powerful – and secret – investors in the world, with more than 13 trillion US $, which is expected to be in their accounts. Powered by state units in a variety of countries, they are known to write the biggest controls in finance and have sometimes been the source of huge scandal.

Within the next 12 months, President Donald Trump also wants the US federal government to have one of his own – potentially to buy out the popular social video app TikTok.

What is a superb wealth fund?

Sovereign Wealth Fund is a pretty amorphic label. At the widest, it may include all investment vehicles or fund operated or owned by a state unit. According to Diego Lopez, CEO of Global SWF, a consulting company that tracks such funds, there are already more than 20 in the United States, largely at the state level. Alaska Permanent Fund Corporation had a value of US $ 79.6 billion in December.

How does superb wealth funds work?

In general, they fall into three categories. You start with cash. You start with assets. And you start by investing goals.

The first type is founded as a large pool of wealth which is then invested in different assets. The idea is to increase the return, usually to build a reserve or “rainy day” fund.

The other is more related to a holding company, in which a variety of state assets are transferred. After selling their share in these assets or taking out loans with the help of them as the collateral can use the cash collected to invest or buy new assets.

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The third – and most counterfeit – the approach means creating a vehicle aimed at attracting and facilitating investments outside for a project such as improving the infrastructure. Such vehicles are also known as strategic investment funds. This is a newer approach that can be useful in markets that are challenging for external investors to enter.

Which countries have superb wealth funds?

About 86 countries are home to 206 sovereign wealth funds, according to Lopez on Global SWF.

The world’s largest sovereign wealth fund is Norway’s Norway Bank Investment Management. With $ 1.74 trillion in assets, it is a classic example of a rainy day fund that was first inoculated by oil and gas revenue.

Singapore’s state themed Holdings is an example of the second type (although it opposes to be labeled as a superb wealth fund). What started as a collection of ports, post offices and other typical government holdings in 1974 has become a diversified collection of assets with a net portfolio value of US $ 288 billion as 31 March 2024.

And Indonesia’s investment authority, which has helped to facilitate and manage investments from abroad, is an example of the third type. So was Malaysia’s 1MDB, which ended in the scandal when billions of dollars collected from bond sales were syfoned.

Why does Trump want to create one for the United States?

This is not clear because it is uncertain what kind of fund Trump has in mind.

When he floated the idea in September during an address at the Economic Club in New York, it was about treading money from customs to an investment vehicle. On February 3, when he signed an executive order that required the establishment of the fund, he said that the United States would soon “have one of the biggest funds”. These comments point to a rainy day fund. The money can be asked in crisis times. Many countries used such funds to pay for emergency measures when Covid-19 broke out.

However, comments from Treasury Secretary Scott Bessent on February 3 suggested that the administration set up the second type of fund, which could sell down or mainly mortgage control holdings. Bessent said the United States would “make money on the asset side of the US balance sheet for the US people”. The fund, he said, would be a “combination of liquid assets, assets we have in this country”.

There were still other indications that the fund could be the third type. Trump has already entered the sectors – and even one of the companies – he wants the fund to invest in before it has collected a single dollar. Originally, he said it could invest in manufacturing, defense and medical research. Later, he said it could be used to facilitate the government’s purchase of Tiktok, which is facing a nationwide ban if it does not divest its US operations from its China-based parent company. Trump advisor also says that the US International Development Finance Corp can be used as a vehicle to mobilize outside of money.

The executive order directed the Bessent and Trade Secretary-Utväg Howard Lutnick to create a plan within 90 days and a fund within 12 months.

How did superb wealth funds performed?

It depends on how you define “performance.” For returns, New Zealand’s superfond is one of the world’s best. It generated a return of 16 percent in 2024, while the Norwegian Wealth Fund received a return of 13 percent. Both would have been trumped by a strategy that simply tracked the US S&P 500 share index, which grew by 23 percent. However, as savings funds often prioritize stability funds often prioritize stability. So having lower volatility and over -inflation gains is more important than growth.

And if the goal is less tangible – for example, if it enables “economic development and diversification of the Saudi economy”, is part of the assignment from Saudi Arabia’s 925 billion US dollars – then success is what your boss (in this case, kingdoms De facto -ruler, Prince Mohammed bin Salman) decides it is.

Experts generally agree that the most successful funds have one thing in common: politicians stay out of the way.

“The most successful funds in the world, such as those in Australia and New Zealand, have controls and balances on what they call weapons length independence from politicians,” said Global SWF’s Lopez.

Is a superb wealth fund sensible for the United States?

Experts say it depends on what Trump is trying to achieve by creating one.

“Superb wealth funds are designed to deal with special problems, and the management of the fund and the nature of investments all goes against the specific problem,” said Professor Paul Rose, dean at Case Western Reserve University’s School of Law. Rose, who has studied and advised on such funds during much of his career, said that most signs indicate that Trump is leaning towards the third type – a strategic investment fund.

If the problem is a lack of national infrastructure, a superb wealth fund may not be the best solution. US states and municipalities already have experience in implementing public-private partnerships or tax concessions to encourage building, and similar measures can be used instead, says Rose.

Lopez was skeptical that an American fund could raise the money to buy TikTok for its imminent business deadline, or that it would even be the right investment vehicle. “If you look at federal assets, there are actually not too many, relatively speaking,” he said. And if a fund was put together with the assets, for example, the train system operator Amtrak and US Postal Service, it is “probably not in line with buying a multi-billion dollars in Tiktok,” he added.

What are the risks?

The US Department of Justice noticed Malaysia’s 1MDB scandal the “biggest kleptocracy figure to date”. Other examples of malpractice have been found in the sovereign wealth funds in Angola, Libya and equatorial guinea.

The size of the funds, the ability to commit fraud and the inherent lack of review of most sovereign wealth funds make them in themselves risky vehicles. They create “significant challenges to avoid an environment for fraud” despite the potential benefits, according to research from the American University of Sharjah and Cleveland State University published last year.

“Economically, the risk is poor investment decision, poor return for the fund and loss of revenue through corruption,” warned Rose. “Politically, the risks are that the fund would lose legitimacy, not only among counterparts but also with the American people.” Bloomberg