Create a New Kind of Sovereign Wealth Fund

Over the past several years, sovereign wealth funds have moved from technocratic backwater to fashionable policy. Canada recently announced the Canada Strong Fund, billed as its first national sovereign wealth fund.¹ In the United States, Biden-era officials explored a federal sovereign wealth fund focused on national security investments, while President Donald Trump later signed an executive order directing the Treasury and Commerce Departments to develop a plan for one.²

Abroad, long-standing state investment vehicles—like Singapore’s GIC and Temasek, the Abu Dhabi Investment Authority and Mubadala, Saudi Arabia’s Public Investment Fund, and the Qatar Investment Authority—have continued to expand aggressively into global, and especially US, assets. Temasek, for example, has announced plans to invest another $30 billion in the United States, while Gulf sovereign investors have helped finance major US media-sector transactions, including Paramount Skydance’s bid for Warner Bros. Discovery.³

Yet despite this renewed enthusiasm, too little attention has been paid to the institutional design question: how to build a durable public investment vehicle that can avoid the weaknesses, politicization, and corruption risks frequently associated with governments taking equity stakes in private economic enterprise. This essay explains why the United States should set up such an institution, and why the model I developed for a National Investment Authority (NIA) offers a particularly useful way to structure it.

How Finance Gets Ignored in the Debate

The debate on the future of the US industrial strategy tends to focus on identifying the right substantive agenda: which sectors to build or which goals to prioritize. Interestingly, however, the problem of financing this transformative agenda is often framed in strikingly thin terms, as if it were simply about assembling enough money from public or private sources.

But financing large-scale economic change is never just a quantitative exercise, nor is it an ancillary matter. Finance is a universal input into every kind of economic activity. Every factory, transmission line, housing development, transit system, and semiconductor plant requires investment of capital, delivered through specific legal and institutional mechanisms. In that sense, finance is not simply a source of funding. It is a lever of power: It shapes what gets built, when, by whom, on what terms, and for whose benefit. The dynamics of this power are complex and hidden from view. In the United States, the bulk of investment capital is privately owned and managed, yet it is the US public’s “full faith and credit” that underwrites vast swaths of private finance and constitutes the most valuable financial resource.⁴

That is why the central problem economic policymakers face is not merely mobilizing larger sums of money. Nor is it simply choosing between public money and private money. The real challenge is institutional. Capital always flows through individual institutions’ balance sheets, which fundamentally reflect their owners’ unique goals, incentives, and constraints. Public and private balance sheets allocate risk, value projects, and distribute returns differently. They are often interlinked and interdependent, but they represent different strategic choices. Therefore, if we care about reindustrialization, decarbonization, regional development, or resilience, we need to channel investment through the right architecture and hierarchy of public and private balance sheets.⁵

How Governance Gets Ignored in the Debate

Unfortunately, today’s economic policy debate often proceeds mechanically, as if there were only two possible funding models for the nation’s long-term development goals. The first is direct congressional appropriation. The second is private capital, typically accessed through the bond market. But neither of these sources is sufficient alone. Appropriations are indispensable for many public purposes, yet they are vulnerable to fiscal brinkmanship, partisan stalemates, and the short horizon of electoral cycles. Private capital markets, by contrast, demand credible revenue streams and commercially legible risk-return profiles. That is why they undersupply investment in projects whose returns are diffuse, social, long-term, or dependent on broader structural change.

A similar narrowing of vision affects debates over what to do with the money once it is mobilized. Public discussion often centers on discrete policy tools: subsidies, guarantees, public-private partnerships, green banks, tax credits, procurement mandates, conditional lending, equity stakes, or derisking mechanisms. Many of these are valuable ideas and deserve serious consideration. But in isolation, each is only a partial fix in search of a governing framework. The question of what the state should do in any particular context cannot be answered separately from the question of which public entity should do it, with what authority, under what governance rules, and through what operational structure. Policy tools do not implement themselves. They require an institutional platform capable of deploying them coherently, consistently, and accountably over time.⁶

Enter the National Investment Authority (NIA)

I propose the NIA as an institutional platform of that kind. It begins from a premise still oddly absent in most American policy discussions: Effective public investment is a coordination problem.⁷ In a complex economy, it is not enough to subsidize isolated projects and hope that the right aggregate result emerges. Substantive nationwide objectives—including decarbonization, industrial upgrading, supply-chain resilience, employment security, and regional economic revival—all require capital to be directed coherently across sectors, time horizons, and geographies. That means the state needs an institution dedicated not only to supplying funding for various projects, but also to formulating and coordinating the investment strategy itself. The NIA is designed to perform exactly that role: identifying structural bottlenecks, setting development priorities, translating them into concrete investment decisions, and implementing those decisions over time.

That is why the NIA should be seen as a platform for implementing many of the most promising public investment ideas now circulating in policy debate. It does not make those ideas redundant or obsolete; it gives them an institutional home. Rather than forcing policymakers to choose abstractly among lending, guarantees, equity investments, industrial-policy targeting, or transition support for affected communities, the NIA offers a structure within which these (and many other) tools can be combined, sequenced, and adapted to particular problems. Its purpose is not to add one more instrument to the tool kit but to create the public capacity necessary to use a range of instruments well.⁸

Layered Structure

The proposed NIA’s design reflects that dual mission of coordination and financing. At the top of the NIA system sits the governing board, an independent federal agency charged with designing and executing a cohesive national investment strategy. Beneath this board sit operating subsidiaries, which are federally chartered government corporations that carry out the NIA’s market activities. A critical layer of the NIA system is the broad network of regional offices that connect national priorities to local needs and public input. The aim is to create an institution able to think strategically at the national level while remaining responsive to communities, labor, and place-based development concerns on the ground.

Two Business Models for NIA Financial Market Operations

The NIA’s financial market operations are designed to follow two principal business models. The first is a credit mobilization and securitization model, housed in the proposed National Infrastructure Bank. This arm would lend directly, purchase project and municipal bonds, bundle and securitize infrastructure-related assets, issue its own bonds, and help create a deeper national market for financing public infrastructure. In effect, it would do for long-term development finance what earlier federal credit institutions did for housing finance and other strategic markets: standardize, aggregate, and scale flows of investment that are otherwise too fragmented, illiquid, or risky for private actors to manage efficiently.

This model matters because many nationally important projects are unattractive within existing market structures, but not in any absolute sense. Local and regional infrastructure needs are often too dispersed, slow-moving, or uncertain to fit neatly into conventional portfolios. By purchasing, pooling, and securitizing these obligations—and by issuing its own securities against a diversified portfolio—the NIA could lower financing costs, improve liquidity, and create a reliable channel for large-scale credit mobilization without forcing every investment to satisfy narrow upfront profitability tests.

The second business model is an equity-based, venture-capital-style model, housed in the proposed National Capital Management Corporation. This arm would sponsor and manage investment vehicles open to public pension funds and other strategically aligned investors with long investment horizons.⁹ As a public asset manager with discretion to invest this blended capital, it would take equity stakes in transformative or high-risk projects that credit markets are poorly suited to support. It could also manage direct public stakes in firms during crises or sectoral transitions, enabling the federal government to preserve productive capacity, protect jobs, and reorganize troubled firms on a new technological basis rather than simply socializing losses and reprivatizing gains.

This equity model is crucial because ownership and control matter. A lender can impose terms, but an equity holder can directly shape governance, resource allocation, technological direction, labor standards, and exit strategy. That is especially important in projects involving network effects, uncertain commercial timelines, or large systemic spillovers. Public policy experts increasingly recognize this fact. Yet there is surprisingly little understanding of concrete institutional mechanisms that would enable the state to act as an equity holder in productive enterprise. The NIA’s distinctive venture capital model gives it the flexibility to act proactively and entrepreneurially, while keeping public goals at the center of investment decisions. It also shows how a wide range of current policy proposals—support for strategic industries, transition management, green innovation, regional revitalization, and worker protection—can be folded into a broader institutional framework.

Relationship with the Fed

To make these business models viable, the NIA proposal relies on a critical but limited use of the Federal Reserve’s balance sheet. The idea is not for the Fed to run industrial policy, but for it to provide backup liquidity support that lowers the NIA’s cost of capital and frees it from dependence on short-term market sentiment. The NIA proposal envisions Federal Reserve purchases of NIA-issued bonds and a backup liquidity line for NIA subsidiaries, supplemented by a Treasury credit line as a secondary contingency. This arrangement would allow the NIA to finance projects whose public value is high, even when its short-term cash returns are uncertain or intentionally muted. In other words, it would use the state’s monetary and financial capacities to support long-term public investment, without reducing everything to annual appropriations.

Governance

Just as important is governance. Any institution with this much power over capital allocation must be designed to resist both private capture and bureaucratic drift.¹⁰ The NIA proposal therefore seeks to balance democratic accountability with the operational flexibility required of a real market actor. Its governing board is envisioned as broadly representative, with mechanisms for including expertise from finance, law, engineering, and environmental science alongside representation linked to labor, nonprofit, and community constituencies. Because its operating arms would be federally chartered public corporations, they would have the flexibility to act in markets with speed and sophistication. Annual reporting, audits, public-interest oversight, and procedural project-selection rules are meant to anchor that flexibility in transparency and democratic control.

Conclusion

The broader point is that institutional design is not a secondary technicality. It is the substance of the problem. If finance is a universal input and a lever of power, then the institutions that structure finance actually structure development itself. We will not build an environmentally sustainable, regionally balanced, and socially just growth model simply by appropriating more money or by hoping private markets will eventually discover the public interest. Nor will we get there simply by identifying clever policy tools one by one. We need new and more effectively tailored financial instruments and public investment institutions capable of coordinating, financing, and governing long-term transformation of the US economy.

The idea behind the National Investment Authority is an attempt to move beyond the stale binary of budget spending versus private capital and beyond the fragmented debate over isolated policy devices, by drawing on the rich arsenal of financial engineering and institutional governance to build something better suited to the demands of our moment. In that sense, the NIA is not just a proposal for funding economic transition. It is a proposal for reclaiming finance itself as a public capacity—and for giving many of today’s most compelling ideas about public investment a comprehensive institutional form.