The Potential of Public Credit Funds

This article proposes a public credit fund as a new institutional form within an emerging ecosystem of public banking in the United States. State and local public pension funds hold nearly $6 trillion in assets, a growing share of which is managed by private asset managers and channeled into private credit funds—a rapidly expanding but largely undisclosed segment of the financial system now approaching $2 trillion in assets under management. Drawing on the political economy of U.S. retirement finance and on Omarova’s institutional-design framework for public banking, the article traces the shift of public pension portfolios from equities into “alternative” assets, documents the declining returns and social harms associated with that shift, and outlines how a publicly managed credit fund that manages public pension fund assets could direct pension assets toward affordable housing, renewable energy, and care infrastructure.