Could Sovereign Wealth Funds Improve U.S. Households’ Financial Security?
Katherine Lucas McKay
Principal Researcher, Insights and Evidence
Wealth and work are two of the defining issues of the moment in the United States, as inequality continues to rise and the labor share of income declines. In response to these trends, and to ensure that all Americans benefit from the wealth being created by new technologies such as artificial intelligence, some leaders have proposed creating sovereign wealth funds (SWFs).
SWFs are government-owned investment funds whose investments and profits are used to advance policy goals. President Trump sparked public interest in this topic in 2025 when he issued an executive order directing the U.S. Department of the Treasury to create a plan for an American sovereign wealth fund. And in 2026, Sam Altman, the CEO of OpenAI, suggested that leading AI companies donate equity to a national SWF that would distribute profits to Americans.
While SWFs are once again part of the national discourse—this time as a possible way to ensure that every American shares in the upside of a transformative technology like AI—Aspen FSP has previously highlighted these funds as systemic and potentially scalable solutions to support Americans’ financial security. So, the conversation about sovereign wealth funds designed to boost the resources of American households is an important and exciting one for Aspen FSP, as our North Star is for all families to have financial stability and the essential wealth they need to thrive—a crucial threshold that, today, only one out of four households meets.
This short explainer will help readers understand how SWFs work, under what conditions these funds could supplement families’ income and enable wealth building, and identify promising pathways forward.
How do sovereign wealth funds work?
There are currently more than 100 sovereign wealth funds operating worldwide that collectively manage more than $10 trillion in assets. Well-known SWFs include Norway’s Government Pension Fund Global, China’s China Investment Corporation, and, in the United States, the Alaska Permanent Fund.
These funds are capitalized with a variety of different resources, and returns are used for different purposes. In fact, SWFs can take many forms but they all share several core characteristics, such as public ownership and a mission to generate positive financial returns. What’s more, truly effective, sustainable SWFs must be independent, transparent, managed without political interference, and adhere to professional accounting and governance standards.
SWFs are started with capital granted by the governments that create and own them. Common sources of funds include:
- Profits generated by extraction of nonrenewable resources, such as oil, natural gas, and minerals;
- Current account surpluses generated by net exports or fiscal revenues that exceed expenses; and
- The sale of assets such as public lands and state-owned enterprises.
Several U.S. states and Tribal nations have sovereign wealth funds. Many were created in the 1800s, when, as new states were admitted to the Union, the federal government granted ownership of federal land to the newly established state governments. States were required to invest revenues generated by federal land grants to support public education.
Of those still in operation, the largest are owned by Texas (approximately $90 billion across two separate funds) and New Mexico (approximately $100 billion). Today, these funds continue to be capitalized with proceeds from use of public lands. The Alaska Permanent Fund was established in 1976 to invest profits from newly discovered oil. At least two Tribal nations, the Eastern Band of Cherokee Indians and the Ho-Chunk Nation, capitalized SWFs with casino and gaming profits.
Uses of SWF investment returns
Sovereign wealth funds have a variety of policy goals that shape both how they invest and how they spend returns. Some common uses of SWF earnings by other nations include:
- Contribute to general revenues. Norway uses a percentage of its fund’s annual earnings to supplement the national budget. Chile draws on its fund’s returns to stabilize revenue during economic downturns.
- Support specific public goods such as healthcare, education, and infrastructure. Nations including Qatar and Kuwait use SWF returns to provide free healthcare to citizens.
- Achieve national security or diplomatic goals. China and Singapore primarily use their SWFs for these purposes through investments in foreign nations’ infrastructure and allies’ key industries.
- Pay direct cash dividends to citizens. Alaska and the Eastern Band of Cherokee Indians each fund regular payments to their citizens with their SWF’s investment returns.
How might a U.S. sovereign wealth fund significantly improve Americans’ financial well-being?
There are three primary strategies that a federal SWF could use to directly boost household financial well-being and get each household closer to having the essential wealth they need to thrive. Each strategy has been implemented successfully by existing state or tribal SWFs within the United States:
- Reduce the cost of families’ core needs. Use the fund’s financial returns to lower the cost of core needs, such as healthcare, childcare, education, or housing.
- Several states use SWFs to support public education; New Mexico’s new universal childcare initiative is an evolution of this strategy.
- Create a capital income stream for households. By distributing financial returns to them as regular cash payments.
- Alaska and the Eastern Band of Cherokee Indians provide regular dividend payments to citizens.
- Contribute to individual wealth accounts. Provide seed funding or regular contributions to individual wealth accounts established for all U.S. citizens.
- The Eastern Band of Cherokee Indians establishes early wealth-building accounts for all children at birth, which receive regular contributions until the child is 18.
Looking toward the future: Design considerations and innovation opportunities
As described above, many SWFs use their resources to achieve goals other than households’ financial well-being, so a U.S. SWF would need to be actively designed and managed for that purpose to achieve that goal. Leaders who see SWFs as a promising systemic solution to American families’ widespread lack of essential wealth should:
Consider sources of capital
The United States faces a different context than most nations that have established SWFs because the federal government runs large deficits and does not control profits from natural resource extraction. However, our nation is home to a dynamic and wealth-generating technology sector, and recent proposals for a United States federal SWF have focused on capitalizing the fund with shares of stock or the profits of artificial intelligence companies. Senator Bernie Sanders and OpenAI’s Sam Altman both support a fund that would own leading AI firms’ stocks (though their ideas diverge from there). Concentrating assets in a few firms from a single industry brings significant risk of volatility, but a broader-based tax on corporate profits or exceptionally wealthy individuals would likely provide more consistent returns.
Focus on financial well-being
Then there is the question of how profits from a U.S. SWF should be directed to support households’ financial well-being. Policymakers must consider how much financial support individuals or families should receive from a SWF; how to stabilize spending as investment returns vary over time; and whether to create a universal program or focus on specific populations, such as children and their families. Leaders who prioritize families’ financial well-being should explore these options and refine their proposals with a focus on ensuring that a fund’s returns meaningfully support families’ financial stability and wealth-building efforts. It is important to note that proponents of this strategy will also have to persuade other SWF advocates that this is the best use of a fund because many are focused on other goals such as the financial sustainability of the federal government and the nation’s infrastructure needs.
Learn from Tribal and state innovators
Given the nation’s fiscal challenges and the lack of political consensus among federal policymakers, it is possible that Tribal nations and U.S. states are best positioned in the near term to establish or expand existing SWFs to support families’ financial well-being and wealth-building opportunities. Several states are currently exploring options to create or expand SWFs, including Tennessee and Missouri, but only New Mexico has an active proposal to use investment returns to support a wealth-building initiative. There, the State Treasurer has endorsed legislation to use some of the New Mexico State Investment Council’s returns to fund a statewide Baby Bonds program. This could be a model for other states to pursue.
Aspen FSP will continue to follow the public debate and policy proposals related to SWFs and share important developments. Alaska, the Eastern Band of Cherokee Indians, and the Ho-Chunk Nation prove that SWFs based in the United States can support families’ financial well-being and enable them to build wealth. But these funds represent just one of many systemic and scalable ways that policymakers could provide everyone with non-labor income or new sources of wealth. From our perspective, what matters most is that leaders urgently prioritize and pursue bold, innovative strategies to achieve those goals.
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