Eric Beiley, executive managing director of Steward Partners, speaks with Quartz for the latest installment of our “Smart Investing” video series. Watch the interview above and check out the transcript below, as Beiley breaks down how a sovereign wealth fund could work in the U.S.
The transcript of this conversation has been lightly edited for length and clarity.
ANDY MILLS (AM): So, President Donald Trump wants a sovereign wealth fund. On behalf of some of our readers who might not know what that is, can you enlighten us?
ERIC BEILEY (EB): Yeah, it’s interesting. A sovereign wealth fund is an investment fund set up by a government. And so the two most well-known ones are Norway, because they have tremendous oil reserves and sales and they take the profits from those sales and they’ve put it in this sovereign wealth fund for the benefit of Norwegians, and it’s one of the largest in the world. I think $1.5 trillion. Singapore has a very large one. A couple of the mid-east countries have them. So they’re investments made by the government that are for the benefit of their citizens. And so, clearly, Trump views this as something he would like to do and in my view, yeah, I think it’s interesting. If it’s well-run, clearly. It has to have some parameters in place, but I think it could be very positive.
AM: Experts say that a sovereign wealth fund is usually most successful with countries that have relatively low debt. The US is not a country with low debt. We have a lot of debt. How could this be successful here
EB: If it is set up and funded? There’d have to be some kind of parameters. Do these assets go to paying down debt or to the wealth fund? And how do you differentiate what goes into it? But it’s true, right? You look at Norway and Singapore; they don’t have debt and so they use excess profits from their economy, oil sales, global trade, that they invest in these sovereign wealth funds.
AM: And they return the profits to their citizens, right?
EB: Typically, yeah.
AM: Okay. And is it in a direct payment or through public works or so?
EB: Great question. I’m not sure exactly how they’re paid out, but it’s a lot of money that these wealth funds have.