Is a U.S. Sovereign Wealth Fund a Good Idea?
In this episode of 'Questions in Finance,' hosts Kate Holland and Veljko Fotak are joined by guest expert William Megginson, Professor and Price Chair in Finance at the University of Oklahoma, to discuss the concept of Sovereign Wealth Funds (SWFs). The conversation centers around a recent proposal for the creation of an American Sovereign Wealth Fund, initiated by an executive order from Donald J. Trump. Bill Megginson provides an in-depth exploration of what SWFs are, why countries establish...
Is a U.S. Sovereign Wealth Fund a Good Idea?
In this episode of 'Questions in Finance,' hosts Kate Holland and Veljko Fotak are joined by guest expert William Megginson, Professor and Price Chair in Finance at the University of Oklahoma, to discuss the concept of Sovereign Wealth Funds (SWFs). The conversation centers around a recent proposal for the creation of an American Sovereign Wealth Fund, initiated by an executive order from Donald J. Trump. Bill Megginson provides an in-depth exploration of what SWFs are, why countries establish them, and the various types that exist. The episode also debates whether a U.S. SWF is a good idea, considering both potential benefits and significant drawbacks. The discussion includes historical performance of SWFs, potential political interference, and alternative ways the U.S. could use its resources for economic and strategic purposes.
Timeline:
00:00 Is a U.S. Sovereign Wealth Fund a Good Idea?
01:36 Welcome to Questions in Finance
02:14 Introducing Today's Guest, Bill Megginson
08:03 A U.S. SWF? 3 out of 10!
09:08 SWF Definition and Purpose
22:11 SWFs, Strategic Funds, Stabilization Funds
27:22 SWF Underperformance
29:37 Political Distortions and Intergenerational Wealth
40:38 Industrial Policy
45:31 A U.S. SWF? How?
58:31 Issuing Bonds to Fund a SWF?
01:05:43 Government-Owned Venture Capital
01:15:46 Autocrats, Democrats, and SWFs
01:16:52 Space Economics!
01:18:29 Summary
Bibliography:
Bortolotti, Bernardo, Veljko Fotak, and William L. Megginson. "The Sovereign Wealth Fund discount: Evidence from public equity investments." The Review of Financial Studies 28, no. 11 (2015): 2993-3035.
Holland, Kateryna. "Government investment in publicly traded firms." Journal of Corporate Finance 56 (2019): 319-342.
Megginson, William L., Xin Yue Zhou, and Robert L. Gholson. "The case against a U.S. Sovereign Wealth Fund." Financial Review 60, no. 1 (2025): 5-12.
Other Sources:
Stephen Jen in the Financial Times, February 17, 2025, "Don’t dismiss Donald Trump’s idea of a Maga SWF"
https://www.ft.com/content/de289862-d5eb-4376-9c4a-d6e08b6b324b
White House SWF Order:
https://www.whitehouse.gov/presidential-actions/2025/02/a-plan-for-establishing-a-united-states-sovereign-wealth-fund/
Soundtrack:
The soundtrack is based on "Walk on a Funky Street" by MondayHopes. Thanks for the music and keep up the good work! Use is under the Pixabay Content License.
