The US Treasury has moved to reassure the world's largest sovereign wealth funds (SWFs) that their existing US investments will not face new tax rules, after the funds warned they could cut exposure to America. The overhaul, proposed by the Internal Revenue Service (IRS) in December, could see some foreign investors pay more US tax. Treasury officials stated they would provide 'transition relief' for current investments and structures.

This comes amid concerns from major SWFs like Abu Dhabi's Mubadala, which holds over $100bn in US assets, and Qatar's $580bn fund. They argue the proposed rules, which broaden the definition of 'commercial activities' under Section 892, could deter new investments. The IRS aims to create clarity but risks making SWFs liable for taxes on direct lending or active restructuring roles.

New Zealand's fund also expressed 'concern' about departing from long-established interpretations.