America's $6 trillion pension pool is underperforming and overcharged
Feb 23rd 2026
Public pension funds hold roughly $6 trillion of long-duration capital yet largely match a simple Vanguard 60/40 index while paying about $60 billion a year in fees, and that capital could instead finance transmission lines, nuclear, housing, and other long-lived infrastructure if governance and incentives change.
- US public pensions hold about $6 trillion, a natural source of patient capital for 20 to 40 year projects.
- Over the past two decades public pensions have returned roughly the same as a simple 60/40 index portfolio while paying far higher fees.
- Estimated total fees and implicit costs on pension assets are about 1 percent annually, roughly $60 billion per year on $6 trillion.
- Allocations to alternatives like private equity and hedge funds have produced negative net alpha since 2008 and carry large carried interest and management fees.
- Historically pensions invested in local bonds and supported municipal infrastructure in a low-fee, aligned-cycle model called fiscal mutualism.
- Countries like Japan and Singapore keep large pools of domestic savings circulating through public channels to lower funding costs and finance long-term investment.
- Redirecting pension capital to finance grids, nuclear, housing, and industrial capacity could avoid new government spending but requires governance reform, lower fees, and safeguards against political or intermediary capture.