Sovereign Wealth Funds and Sovereign Influence — National Security, Transparency, and the Limits of U.S. Investment Law
- Mar 25
- 21 min read
Saanvi Siddhi
Edited by Samantha Tonini, Anvi Garyali, Cheng Mou (Momo) Chen, Judge Baskin, and Sahith Mocharla
A sovereign wealth fund (SWF) is a government-owned investment vehicle established for long-term macroeconomic purposes [1]. SWFs typically invest in equities and debt, both internationally and domestically, and differ from central banks in that they manage excess reserves for long-term investments rather than prioritizing short-term monetary stability. Unlike official reserves, SWF portfolios typically include higher-risk, higher-return assets. Once viewed merely as fiscal safety nets, the SWFs of today have evolved into instruments of both economic management and geopolitical influence. Their reach now extends beyond stabilizing budgets – shaping industries, markets, and political relationships worldwide. However, this evolution far outpaces the current governing legal framework, which is more concerned with capital rather than ensuring market transparency and national security. The current U.S. regulatory regime fails to provide a coherent, transparent, and forward-looking framework for managing sovereign wealth fund activity. Moreover, proposals to establish a federal U.S. SWF confront not only fiscal impracticalities but also substantial constitutional and statutory hurdles that the current framework is ill-equipped to resolve.
What are Sovereign Wealth Funds
SWFs are heterogeneous in nature; however, they can be sorted into two major categories based on their source of funding and purpose of establishment. Commodity funds are primarily funded by oil and gas revenues, whereas non-commodity funds are mainly funded through asset transfers from official foreign exchange reserves [2]. Within those two funding denominations, there are three main types of sovereign wealth funds differing from one another based on their primary reason for operation. Stabilization funds are common in countries that have large amounts of commodity exports or natural resource-driven industries. For example, Mexico and Chile maintain their stabilization funds through their holdings in the oil and copper industries, respectively. Their sovereign wealth funds serve as fiscal stabilizers, reducing commodity-price volatility, allowing governments to maintain budgetary stability during economic downturns as commodities typically face less fluctuation than market equities [3]. Savings funds, meanwhile, are primarily used to create long-term wealth. Norway, for example, invests its oil and gas revenue to benefit “both current and future generations” [4]. Finally, strategic investment funds, the most politically driven of the bunch, advance national policy goals. China’s SWF, the China Investment Corporation, has financed the Belt and Road Initiative (BRI)––a global development strategy spanning across Europe, Africa, and Asia––aiming to improve infrastructure in developing economies, urbanize less developed countries, and invest in global energy markets; likely targeting increasing levels of alliance of influence within the regions [5]. Beyond economic development, these investments also advance broader geopolitical objectives by expanding China’s control over strategic infrastructure such as ports and energy corridors, establishing alternative financial networks that reduce reliance on Western-led institutions, and securing long-term access to critical supply chains [6]. All of which works to increase Chinese influence within participating regions. Overall, however, while the classifications for SWFs (stabilization, savings, and strategic) are useful descriptors that reflect primary purposes, they are neither rigid nor mutually exclusive. In practice, many sovereign wealth funds pursue overlapping objectives, and their priorities may shift over time in response to domestic economic pressures or evolving geopolitical strategies.
Sovereign wealth funds are not merely passive repositories of national savings; in practice, the largest of them operate as influential economic and political actors of their own with the capacity to shape global markets through their governance models and investment strategies. Norway's SWF, the Government Pension Fund Global, is the largest in the world, valued at over $2 trillion U.S. dollars [7]. Regarded as the global benchmark for transparency and ethical investment, it has recently made headlines for rejecting Elon Musk’s proposed $1 trillion compensation package at Tesla as well as for divesting from firms connected to Israel’s military (the Israel Defense Forces). By contrast, China’s sovereign fund, the China Investment Corporation (CIC), is a fund that was established with more strategic geopolitical purposes in mind; the CIC trails behind Norway with assets of roughly $1.3 trillion [8]. Funded through decades of trade surpluses and massive foreign exchange reserves, the CIC operates primarily as a strategic investment fund. Its energy portfolio, estimated in the hundreds of billions of dollars, has increasingly shifted toward renewable energy ventures that advance domestic clean-energy goals while maintaining control over critical supply chains abroad [9]. These investments align closely with the BRI, which now includes infrastructure agreements with over 150 countries and is designed not only to construct global infrastructure but also complements the CIC’s broader use of financial diplomacy to strengthen China’s global economic and political influence.
Many SWFs are specifically found amongst resource-rich states, where SWFs derive their capital from commodity exports. As such, a majority of these types of funds are often found in oil-producing countries. An example of this is the Abu Dhabi Investment Authority of the United Arab Emirates (UAE), valued at a little over $1.1 trillion [10]. Together, these purpose-based classifications (stabilization, savings, and strategic) demonstrate the different policy objectives sovereign wealth funds are designed to advance, while commodity and non-commodity distinctions reflect how those objectives are financed. This structural diversity illustrates the numerous ways that SWFs can be organized in order to pursue the values-driven, strategic, or resource-driven objectives of the respective countries. Critically, SWFs differ from traditional investment vehicles, such as hedge funds or private equity groups, in that their purpose and mission derive from foreign governments, not individual actors, and their investment strategies may shift in response to geopolitical priorities. Even when structured as savings or stabilization funds, SWFs remain instruments of state power, highlighting why their growing scale and influence raise regulatory questions for recipient countries like the United States
How have Sovereign Wealth Funds Operated Within the U.S.
During the global financial crisis of 2008, many SWFs under management from countries in the Middle East and Asia invested billions of dollars into American and European-owned financial institutions [11]. For example, the Abu Dhabi Investment Authority invested $7.5 billion into Citigroup; Singapore invested $10 billion into Merrill Lynch; and China invested a total of $10 billion into Morgan Stanley and Blackstone. While these companies still incurred great losses, foreign investment was critical in keeping them afloat. These investments into (at the time) struggling financial institutions acted as a stabilizing force for the global economy and fostered a degree of confidence among the U.S. government and domestic financial institutions in SWFs as long-term market participants [12]. And while the overall positive impact of SWF investment during this time cannot be denied, it is also true that said funds incurred substantial losses from these investments, complicating the presumption that their motives were purely commercial. This is especially important given that the U.S. financial sector occupies a central position in U.S. national security and underpins the country’s ability to project economic and foreign policy power. These past examples underscore one of the key controversies surrounding SWFs and how they can simultaneously benefit economies by providing critical liquidity and market stability during periods of financial distress, and also sow distrust by embedding foreign state-owned actors into key American institutions that control American finances.
Since the 2008 crisis, foreign investment has only grown. In 2025, the UAE pledged to invest $1.4 trillion across the U.S. economy, significantly increasing existing investments across key sectors like AI, manufacturing, and semiconductors, as well as directly investing in companies like Energy Capital Partners, Nvidia, and Microsoft [13]. The economic significance of these investments, however, extends beyond capital inflows. Investments by sovereign wealth funds in strategically sensitive sectors create opportunities for foreign states to acquire control over corporate or public assets. SWFs would stand to benefit from such informational advantages, which can be leveraged to advance their state-owned enterprises in related industries [14]. For example, investments in the semiconductor or artificial intelligence sectors can provide foreign state actors with access to proprietary research directly linked to U.S. defense and military research and development. The United States’ defense infrastructure relies heavily on private-sector innovation; any potential foreign-state insight into related industries risks compromising not only commercial competitiveness but also national security readiness. As such, these kinds of investments run the risk of eroding US industrial competitiveness and strengthening rival states’ economic and geopolitical power. Taken together, these examples demonstrate why SWFs can not just be counted as cross-border international investors. Their vast resources, rival-state affiliations, and habit of targeting key sectors raise heightened regulatory concerns about economic security, strategic influence, and national security.
Regulatory Concerns and Existing Operating Precedent
At present, traditional warfare has taken a backseat to economic leveraging and financial statecraft as the primary tools for global statecraft and power projection. SWFs sit at the center of this shift as they represent a great source of economic risk to the U.S. The most compelling economic concerns surrounding sovereign wealth funds stem not from their foreign ownership, but from their scale, concentration, and capacity to alter global capital flows in ways that threaten U.S. financial stability. Hedge funds were widely identified as one of the leading contributors to the 2008 financial crisis, yet today, even while numbering in the thousands, they collectively manage fewer assets than SWFs, which number at a fraction of that [15]. Given that hedge funds were heavily criticized for their role in that crisis, the fact that SWF assets are both larger in scale and far more concentrated in number raises concerns about systemic risk (the risk of a collapse of an entire industry or economy, rather than a single component), since a single sovereign wealth fund has greater capacity to influence markets than any individual hedge fund. Additionally, because these funds are capable of rapidly reallocating or withdrawing large amounts of capital, they pose an unparalleled potential risk of causing destabilization and volatility in the market.
SWFs have grown exponentially over the past two decades, growing from roughly $1.2 trillion to over $15 trillion in total assets [16]. The U.S., in particular, remains the world’s largest recipient of foreign investment, and while many American companies benefit from these investments, the rise of various state-controlled investors introduces significant national security concerns. In particular, SWFs can pursue investment strategies that conflict with U.S. policy objectives, using financial influence as a tool of foreign policy. These concerns have intensified with the emergence of powerful funds from non-democratic countries like China, Russia, and Saudi Arabia—and they are not without reason. In 2008, China conducted a secret agreement with Costa Rica to purchase $300 million in Costa Rican bonds in exchange for Costa Rica severing diplomatic ties with Taiwan, demonstrating SWFs’ use in coercing political action [17]. To mitigate these risks domestically, the United States subjects foreign government-controlled investments to rigorous review under the Committee on Foreign Investment in the United States (CFIUS), which works to balance open investment with national security. Established under Section 721 of the Defense Production Act, CFIUS takes action to prevent “foreign control over any United States Business” [18]. Additional regulations, including the Bank Holding Company Act and the Securities Exchange Act of 1934, apply when an entity seeks substantial stakes in U.S. banks or financial institutions [19] [20]. However, many SWFs employ loopholes, structuring their investments to avoid triggering these thresholds, often by taking minority, non-controlling stakes, or refusing seats on company boards.
Beyond security, SWFs present significant transparency concerns that complicate regulatory oversight. Many SWFs do not disclose their holdings or strategies, making it difficult to evaluate whether their investments are driven solely by commercial considerations or broader geopolitical objectives [21]. This opacity introduces instability into financial markets by obscuring when and why SWFs enter or exit investments, leaving firms and regulators unable to anticipate capital movements or assess potential leverage threats. While such fiscal uncertainty poses meaningful risks to market efficiency, the more serious threat lies in the potential for the political instability that may accompany it. Sudden capital withdrawals or reallocations can generate volatility, pricing distortions, and liquidity shocks - economic harms that become even more consequential when they intersect with geopolitical influence. In essence, the concern is not merely that markets may fluctuate, but that fiscal unpredictability may be used as an instrument of political influence. Because SWFs rarely publish clear policy objectives, market participants cannot reliably track investment patterns, creating conditions in which even rumors of investment or divestment may trigger disproportionate market reactions [22].
This paradigm is driven by the combination of obscure foreign state ownership as well as the extensive scale of sovereign wealth funds. SWFs can manage trillions of dollars in assets, ensuring that even marginal portfolio adjustments have the ability to move markets. At the same time, their immense liquidity and long-term investment horizons can generate investor confidence during periods of distress (as seen during the 2008 financial crisis), creating a paradox in which the very scale that stabilizes markets in crises also magnifies systemic risk when the intentions of the foreign government involved are in question. This lack of clarity also affects investor confidence. One study by the Federal Reserve Board indicated that while announcements of investments from SWFs are usually associated with positive market reactions, investments from less transparent funds experience smaller increases in stock prices than investments from more transparent funds [23]. The rapid growth of foreign state-owned investment has also placed increasing pressure on the CFIUS’s ability to monitor and enforce mitigation efforts. These efforts usually include measures that reduce or eliminate national security risks of foreign transactions.
According to the Government Accountability Office's (GAO) 2024 report, an audit report submitted by congressional request, the number of active mitigation agreements between CFIUS and foreign investors has nearly quadrupled in the past decade [24]. However, the GAO also found that CFIUS lacks the framework and the staffing required to adequately review said agreements, leading to delays in enforcement and inconsistent oversight. This deficiency is particularly consequential in modern financial markets, where decisions are executed in seconds and where millions of dollars can turn based on the speed and accuracy of information. In a financial environment in which capital can be reallocated instantaneously across borders, regulatory lag is not a neutral delay; it can materially alter market outcomes and allow investors to capitalize on information discrepancies before oversight mechanisms can respond.
Additionally, CFIUS's oversight effectiveness is inherently constrained by its narrow mandate, which limits review to national security concerns and provides little precedent for addressing broader market-integrity or transparency risks [25]. Market integrity and disclosure obligations fall instead under the jurisdiction of the Securities and Exchange Commission (SEC). Yet, the limited transparency of SWFs significantly hampers the SEC’s ability to enforce securities regulations effectively. As a result, both CFIUS and the SEC face structural and informational limitations that prevent them from meaningfully monitoring and regulating sovereign wealth fund activity. These findings reinforce broader concerns that SWFs require far stronger transparency and enforcement mechanisms in order to properly alleviate national security concerns, not merely because regulatory agencies may be under-resourced, but because transparency itself is a prerequisite for effective oversight. Unless there is adequate disclosure regarding ownership structures, investment objectives, and portfolio concentration, regulators cannot accurately assess risk exposure or distinguish ordinary commercial behavior from strategically motivated activity. Greater transparency would allow both CFIUS and the SEC to intervene earlier and more precisely where genuine national security or market-integrity risks arise. Without standardized review and disclosure processes, the U.S. risks being reactive rather than proactive in addressing foreign influence in its markets.
In February 2025, Trump signed an executive order that called to “maximize the stewardship of our national wealth” and ordered the creation of a U.S. SWF to “promote fiscal responsibility” and “establish economic security for future generations” [26]. Specifically, the order gave the Secretary of the Treasury and the Secretary of Commerce 90 days to come up with a plan for the creation of a national SWF. However, over a year has passed, and nothing has been released to the public, making it unclear whether the creation of a fund is still under construction. Regardless of the pseudo-continued Executive Order, there are several reasons why the establishment of a US-owned SWF is considered improbable. First, it would be difficult for the U.S. to secure the seed funding needed to start such a fund. In other countries, SWFs are funded through surpluses gained from exports or commodity revenues. However, in the US, such excesses resulting from natural resources like oil and gas are, when government-owned, typically managed at the state level. If the federal government were to try to insert itself into an already functioning system like this, then states would surely cry overreach and encroachment into their fiscal autonomy [27].
Additionally, the U.S. runs the largest global deficit economy, with an economy that spends more than it earns and over 30 trillion dollars of debt, which severely limits the federal government’s ability to capitalize a liquid sovereign wealth fund without relying on additional borrowing or reallocating existing public resources [28]. Finally, a national SWF would offer limited marginal benefit given the existing structure of the U.S. economy. American capital markets are already the largest and most liquid in the world, capable of efficiently financing infrastructure, innovation, and long-term growth through existing private investment mechanisms. In the absence of surplus revenues to manage or systemic market failures to correct––the core purposes SWFs serve in most other countries––a federal SWF would likely be redundant rather than meaningfully enhance economic performance [29].
While the U.S. may not have a Federal SWF, several states have long-established their own SWFs. These wealth funds are typically used to fund education systems and state operations, allowing said states to maintain lower state taxes [30]. Currently, there are over 20 state-level funds in the country. Among them, the Alaska Permanent Fund (APF) stands out as the largest and most recognizable, with an estimated value of $84 billion. The APF was created in 1976 via a state constitutional amendment. It is run by the Alaska Permanent Fund Corporation, a state-owned corporation, with fiduciaries granted full authority over investment decisions to insulate the fund from short-term political interference and preserve its long-term viability. The APF itself is divided into two different funds: the Principal Fund, which is permanent and non-spendable, and the Earnings Reserve Account (ERA), which is spendable via legislative allocation [31]. Money in the ERA makes up a portion of a yearly dividend issued to all Alaskan Citizens. Apart from Alaska, Texas is the second most recognizable state on this topic, with two unique SWFs. The Texas Permanent School Fund (PSF), created in 1854, is one of the oldest SWFs in the world and finances the state’s public school system as well as manages the sale and mineral leasing of PSF lands [32].
The PSF is valued at $57.3 billion and is managed by a combination of members of the state board of education, gubernatorial appointees, and elected officials. Texas’s second SWF, the Public University Fund (PUF), exclusively benefits the University of Texas and Texas A&M school systems [33]. The PUF derives its income primarily from oil, gas, and mineral leases on state-owned lands in West Texas. The fund’s constitutional charter forbids the sale of PUF lands, ensuring that all income from mineral extraction is retained and reinvested. These state-level sovereign wealth funds can be used as the basis of a federal SWF, illustrating both the possibilities and limitations of a successful long-term fund. If established, the national SWF would need to be similarly constitutionally grounded, narrowly purposed, and insulated from short-term political pressures – conditions that would be much harder to meet on the federal level.
Current Regulation Frameworks
Though SWFs are used by some of the largest governments in the world, there are minimal international regulations for them. The Santiago Principles were created in early 2008 by a group of 26 countries, notably including countries like the US, China, and Norway. Said countries, under the coordination of the International Monetary Fund (the international institution that ensures the stability of the international financial system), came up with a set of widely accepted principles of good practice for the governance of SWFs [34]. These principles mainly encouraged countries to invest based on risk and return considerations, while also trying to contribute to financial stability [35]. However, the principles are hard-pressed to be enforced and, as such, tend to be more of a suggestive framework rather than a legally binding one.
As far as domestic regulations go, U.S. laws grant the Executive branch broad discretion to regulate foreign investment [36]. However, this discretion is still subject to constitutional constraints. In the 2014 case Ralls Corp v. Committee on Foreign Investments, Ralls, a corporation owned by Chinese Nationals, bought four American LLCs, all specifically formed to develop wind farms [37]. CFIUS thought the acquisitions posed a national security risk because the wind farm sites were located near a Navy training facility in Oregon. The committee ordered Ralls to divest its ownership interests, and President Obama later issued an executive order formally blocking the transaction. Ralls challenged this, saying that they were denied their due process rights. The United States Court of Appeals for the District of Columbia Circuit partially ruled in Ralls’s favor, holding that the government was required to provide greater procedural transparency, including prior notice and sufficient time to contest the determination. This case was the first successful challenge to a CFIUS decision and showed that constitutional protections apply even in national security decisions regarding foreign investors, and caused more fairness and transparency for CFIUS decisions.
However, while Ralls provides additional procedural protections for foreign investors, most other legal safeguards remain limited under federal statute. For example, Section 4565 of Title 50 of the United States Code (U.S.C.), commonly known as the Defense Production Act, grants the Executive Branch broad discretionary authority to block transactions deemed a threat to national security [38]. Additionally, the courts are unable to contest the President’s final decision. In Ralls, the court only mandated more transparency in regards to giving prior warning and enough time to contest. Under the Freedom of Information Act, CFIUS proceedings are confidential, which prevents public scrutiny and blocks evidence and reasoning from meaningful review, further limiting accountability.
While Ralls pertains to executive discretion through procedural due process, the broader U.S. legal structure governing sovereign wealth funds remains defined by the laws of sovereign immunity. Under U.S. law, the primary framework governing litigation against foreign states and their state-controlled entities is the Foreign Sovereign Immunities Act (FSIA). Because of SWFs’ nature as state-owned enterprises, U.S. courts primarily evaluate SWFs through the FSIA, treating them as extensions of the foreign state when they qualify as an “agency” or “instrumentality” under 28 U.S.C. Section 1603(b). Unless certain statutory exceptions apply, foreign states are “immune from the jurisdiction” of U.S. courts [39]. When it comes to the commercial character of SWFs' investments, as they operate as active participants in global financial markets, it is taken on a case-by-case basis, referencing “the nature of the course of conduct … rather than by reference to its purpose” [40].
SWFs are typically analyzed through this immunity-first lens, often qualifying as state instrumentalities under Section 1603(b) and retaining immunity even when their conduct closely resembles that of private investors. This means that conduct which would expose a hedge fund or private investor to immediate civil litigation may instead trigger a threshold immunity inquiry when undertaken by a SWF. In general, sovereign immunity is characterized not only as immunity from liability, but also from lawsuits. And, so plaintiffs must first overcome statutory exceptions before being able to reach the crux of their claims. While SWFs are not categorically exempt from U.S. law and cannot freely violate federal statutes without consequence, the procedural protections afforded by sovereign status can delay, complicate, or in some cases prevent judicial scrutiny in ways not afforded to purely private actors. The result is a system in which foreign state-controlled investors may participate extensively in U.S. financial markets while remaining insulated from judicial scrutiny, even when their conduct closely resembles that of private market actors [41]. However, recent case law that explores the cross-section between SWFs and sovereign immunity illustrates the emerging limits of this framework. In the Supreme Court’s decision on the case Türkiye Halk Bankasi A.S. v. United States, it was ruled that the FSIA does not extend sovereign immunity to criminal prosecutions and rejected the notion that state ownership alone insulates an entity from U.S. law [42]. In this case, Halkbank, a majority state-owned Turkish bank, was accused of participating in a scheme to evade U.S. sanctions on Iran by funneling billions of dollars through the U.S. financial system. SCOTUS's dismissal of their claim of immunity under the FSIA marked a significant doctrinal boundary. Although Halkbank involved a state-owned bank rather than an SWF, its reasoning underscores a growing judicial recognition that sovereign control cannot serve as a categorical shield when state-controlled entities operate as market participants.
Although the previous case illustrates a strict judicial limit on the scope of sovereign immunity imposed on state-owned entities, other cases exemplify a passivity that allows foreign sovereign investors to avoid meaningful legal consequences. In the case of Atlantica Holdings, Inc. v. Sovereign Wealth Fund (2016), a U.S. investment entity bought civil claims against a Kazakhstan-owned SWF, the SK fund [43]. In this case, the plaintiffs alleged that the SK fund purposefully misrepresented the value of debt securities that were issued by a majority-owned Kazakh bank that were then subsequently bought by U.S. investors, resulting in domestic financial loss. Applying the FSIA’s commercial activity exception, the district court held that SK Fund was not entitled to immunity because even though the claims were based on acts taken abroad, they had a direct impact within the US. In reaching this conclusion, the court treated SK Fund not as a sovereign regulator, but as a market participant whose investment-related communications bore the same legal consequences as those of private actors. The SK Fund promptly appealed this decision, challenging both the denial of sovereign immunity and the court’s exercise of personal jurisdiction.
In the first part of their ruling, the appellate court upheld the lower court's guilt ruling under the commercial exception clause, which emanated from the SK funds' activities having a direct domestic impact in the U.S. However, the appellate court also clarified that overcoming immunity under the FSIA does not automatically resolve the separate constitutional requirement of personal jurisdiction, i.e., the court’s authority, under the due process clause, to issue a binding decision against the defendant [44]. Subsequently, the SK Fund argued that even if immunity did not apply, the district court could not exercise jurisdiction over it because it lacked sufficient minimum contacts with the United States, meaning that it had not established deliberate, meaningful connections with the United States such that exercising jurisdiction would be reasonable [45]. The SK Fund, therefore, sought dismissal on constitutional grounds, asserting that the exercise of jurisdiction would violate due process. Shortly after the Second Circuit’s handling of Atlantica Holdings v. Sovereign Wealth Fund, the U.S. Supreme Court clarified in CC/Devas (Mauritius) Ltd. v. Antrix Corp. Ltd. that, under the FSIA’s text, personal jurisdiction over a foreign state or state-owned entity exists whenever an immunity exception applies and service of process is proper—and that the statute does not itself require a separate minimum-contacts analysis—while leaving open whether the Constitution independently requires such contacts [46].
Ultimately, the appellate court did not resolve the question of personal jurisdiction, deeming it unnecessary to do so [47]. Instead, after affirming the district court’s ruling that sovereign immunity does not apply, the Second Circuit explicitly declined to exercise pendent appellate jurisdiction (the discretionary doctrine that allows appellate courts to review additional issues that are closely related to an issue already before it) over the personal jurisdiction challenge [48]. Therefore, dismissing that portion of the appeal without deciding whether the minimum contact threshold was satisfied. In doing so, the court left the personal jurisdiction issue to be addressed at a later stage in the proceedings. The litigation process of this case took years before it was able to reach a final verdict in 2022, in which the courts ruled in favor of the defendants, and ultimately no liability was found [49]. This outcome highlights a deeper structural problem: while courts may pierce sovereign immunity in theory, the combination of FSIA protections, procedural hurdles, and jurisdictional ambiguity creates a legal environment in which foreign state-controlled investors retain substantial insulation from judicial scrutiny. This multi-step barrier illustrates how sovereign wealth funds, even when acting indistinguishably from private market actors, continue to benefit from an immunity-first framework that complicates accountability.
While CFIUS addresses prospective national security risks through executive review, and FSIA governs litigation through immunity doctrines, neither framework fully resolves the structural problem of state-controlled capital operating within U.S. markets. The result is a system that oscillates between expansive executive discretion (as seen in CFIUS confidentiality and limited judicial review) and judicial ambiguity (as seen in FSIA and personal jurisdiction disputes). Rather than providing a coherent framework for addressing the growing influence of sovereign wealth funds in U.S. markets, the existing legal regime forces courts to navigate solitary immunity exceptions and jurisdictional technicalities, creating a fragmented and reactive system that lacks clear standards for regulating state-owned investment actors.
The legal framework governing both foreign and domestic U.S. SWFs (and potentially a national one) remains underdeveloped and unable to handle the rising influx and complexities of a modern, geopolitically sensitive investment environment. As it stands, U.S. law does not adequately regulate SWF activity within the country, nor does it provide a clear or coherent structure that could support the creation of a national SWF without raising significant governance and accountability issues. If the United States intends to establish its own SWF and, in turn, directly invest into foreign markets, it needs to first clarify and legitimize the standards that apply to foreign state-owned investors operating in the country. This is necessary not only to ensure fairness but also to strengthen investor confidence and avoid arbitrary enforcement. To achieve this, CFIUS should adopt codified due process protections and more transparent, consistent decision-making standards, as the current framework, characterized by strict confidentiality requirements, limited public rationales, and presidential decisions insulated from judicial review, creates a substantial accountability gap. These deficiencies underscore broader concerns about the risks associated with a national SWF, including potential political interference, reduced transparency, and challenges in maintaining market neutrality.
[1] Sovereign Wealth Funds, U.S. DEP'T OF THE TREASURY (2007),
[2] Kevin Brennan, Gautam Jain & Sagatom Saha, Structuring a U.S. Sovereign Wealth Fund, Ctr. on Global Energy Policy (May 1, 2025)
[3] Sovereign Wealth Funds: Global Trends and the UK’s Role in the Evolving Landscape for Sovereign Investment Vehicles, TheCityUK (Nov. 2024),
[4] The Fund, Norges Bank Investment Management (Apr. 28, 2017), https://www.nbim.no/en/.
[5] Julian Freyre, The Economic Influence of the Chinese Government’s Sovereign Wealth Fund, Michigan Journal of Economics (Jan. 8, 2025)
[6] James McBride, Noah Berman & Andrew Chatzky, China's Massive Belt and Road Initiative, COUNCIL ON FOREIGN RELATIONS (Feb. 2, 2023, 4:30 PM), https://www.cfr.org/backgrounders/chinas-massive-belt-and-road-initiative.
[7] see [4]
[8] Largest And Global Sovereign Wealth Fund Institute | SWFI, https://www.swfinstitute.org/fund-rankings/sovereign-wealth-fund.
[9] see [5]
[10] see [8]
[11] Victorino J. Tejera, The U.S. Law Regime of Sovereign Immunity and the Sovereign Wealth Funds, Miami Business Law Review (Dec. 2016), https://repository.law.miami.edu/cgi/viewcontent.cgi?article=1284&context=umblr
[12] Natalie Coffin, Assessing and Addressing Threats to the US from Sovereign Wealth Funds: Case Studies on the Russian, Chinese, and Saudi Arabian Funds, SCHOLARSHIP @ CLAREMONT (2019), https://scholarship.claremont.edu/cgi/viewcontent.cgi?article=3272&context=cmc_theses#:~:text=Research%20on%20SWFs%20determined%20they,forces%20in%20the%20global%20economy.
[13] U. S. Mission UAE, Thanks to President Trump, UAE Announces Significant Investments in U.S. Economy, U.S. Embassy & Consulate in the United Arab Emirates (Mar. 21, 2025), https://ae.usembassy.gov/thanks-to-president-trump-uae-announces-significant-investments-in-u-s-economy/.
[14] see [12]
[15] see [12]
[16] Sovereign Wealth Funds and Public Pension Funds Data Platform, https://globalswf.com (last visited M. D, 2026).
[17] Anna Paulson, Raising Capital: The Role of Sovereign Wealth Funds, Federal Reserve Bank of Chicago (Jan. 2009), https://www.chicagofed.org/publications/chicago-fed-letter/2009/january-258.
[18] 50 U.S.C. § 4501 et seq.
[19] 12 U.S.C. § 1841 et seq.
[20] Securities Exchange Act of 1934, LII / Legal Information Institute, https://www.law.cornell.edu/wex/securities_exchange_act_of_1934 (last visited M. D, 2026).
[21] see [17]
[22] see [12]
[23] Jason Kotter and Ugur Lel, FRB: Friends or Foes? The Stock Price Impact of Sovereign Wealth Fund Investments and the Price of Keeping Secrets, The Federal Reserve Board (Aug. 18, 2008) https://www.federalreserve.gov/pubs/ifdp/2008/940/ifdp940.htm.
[24] Foreign Investment in the U.S.: Efforts to Mitigate National Security Risks Can Be Strengthened, U.S. Government Accountability Office (Apr. 2024), https://www.gao.gov/assets/gao-24-107358.pdf.
[25] see [12]
[26] A Plan for Establishing a United States Sovereign Wealth Fund, The White House (Feb. 4, 2025), https://www.whitehouse.gov/presidential-actions/2025/02/a-plan-for-establishing-a-united-states-sovereign-wealth-fund/.
[27] Megginson, William L. and Zhou, Xin Yue and Gholson, Robert, THE CASE AGAINST A U.S. SOVEREIGN WEALTH FUND, The Financial Review, forthcoming (Nov. 27, 2024), https://ssrn.com/abstract=5063684
[28] see [3]
[29] see [27]
[30] Richard E. Caroll, U.S. Domestic Sovereign Wealth Funds, Modern Diplomacy(Nov. 14, 2024), https://moderndiplomacy.eu/2024/11/14/u-s-domestic-sovereign-wealth-funds/.
[31] Fund Structure, Alaska Permanent Fund Corporation, https://apfc.org/fund-structure/ (last visited M. D, 2026).
[32] https://texaspsf.org/ (last visited M. D, 2026).
[33] The Permanent University Fund (PUF) | The University of Texas System, (Feb. 23, 2026), https://www.utsystem.edu/puf.
[34] see [11]
[35] Joonkyu Park & Han Van Der Hoorn, Financial Crisis, SWF Investing, and Implications for Financial Stability, 3 Global Policy 211 (Feb. 06, 2012), https://onlinelibrary.wiley.com/doi/10.1111/j.1758-5899.2011.00151.x.
[36] S. Rep. No. 110-82 (2007).
[37] Ralls Corp. v. Committee on Foreign Investment in the United States, 758 F.3d 296 (D.C. Cir. 2014).
[38] 50 U.S.C. § 4565.
[39] 28 U.S.C. § 1604.
[40] 28 U.S.C. § 1603.
[41] see [11]
[42] Turkiye Halk Bankasi A.S. v. United States, 598 U.S. 264 (2023).
[43] Atlantica Holdings, Inc. v. Sovereign Wealth Fund Samruk-Kazyna JSC, 813 F.3d 98 (2d Cir. 2016).
[44] Personal Jurisdiction, LII / Legal Information Institute, https://www.law.cornell.edu/wex/personal_jurisdiction (last visited M. D, 2026).
[45] Minimum Contact Requirements for Personal Jurisdiction, CONSTITUTION ANNOTATED, https://constitution.congress.gov/browse/essay/amdt14-S1-7-1-4/ALDE_00013035/ (last visited M. D, 2026).
[46] CC/Devas (Mauritius) Ltd. v. Antrix Corp. Ltd., 605 U.S. ___ (2025).
[47] see [43]
[48] Pendent Jurisdiction, LII / Legal Information Institute, https://www.law.cornell.edu/wex/pendent_jurisdiction (last visited M. D, 2026).
[49] Atlantica Holdings, Inc. v. Sovereign Wealth Fund Samruk-Kazyna JSC, 2 F. Supp. 3d 550 (S.D.N.Y. 2014)
Comments