Pension funds own roughly 7% of the U.S. stock market, based on the Federal Reserve’s most recent Financial Accounts data from the first quarter of 2025. That figure combines private pension funds (about $4.6 trillion in stock) with state and local government defined benefit retirement systems (about $3.2 trillion), for a combined $7.9 trillion out of roughly $108.5 trillion in total corporate equities.1Federal Reserve. Financial Accounts of the United States – L.224 Corporate Equities The share is a fraction of what it used to be. As recently as 1999, pension funds held about 24% of the U.S. equity market.2Social Security Administration. State and Local Pension Plans Equity Holdings and Returns
What Counts as a Pension Fund in This Number
The Federal Reserve’s L.224 table splits retirement-related equity ownership into two institutional buckets: private pension funds (corporate defined benefit plans and 403(b) plan trusts) and state and local government employee defined benefit retirement funds.3Board of Governors of the Federal Reserve System. FEDS Notes: Corporate Equities by Issuer in the Financial Accounts of the United States Both cover assets managed centrally by professional fund managers on behalf of plan participants.
What is not counted: 401(k) accounts, IRAs, and other defined contribution plans where individuals pick their own investments. Because the individual legally owns those assets, the Fed reports them under “Households and Nonprofit Organizations.” This single classification choice is why different sources give very different answers to the same question.
The 7% figure also captures only the stock these funds hold directly. When a pension plan invests $1 billion through a Vanguard or BlackRock index fund, that stock shows up under “Mutual Funds” or “Exchange-Traded Funds” in the Fed’s data, not under the pension fund category. Mutual fund shares and inter-corporate equity holdings are excluded from the main pension totals to prevent double counting.3Board of Governors of the Federal Reserve System. FEDS Notes: Corporate Equities by Issuer in the Financial Accounts of the United States Because pension funds increasingly use index funds and ETFs as their preferred vehicles, the direct-ownership 7% understates their true economic interest in the market. How much higher the beneficial ownership actually runs is difficult to pin down.
One boundary worth flagging: the Social Security Trust Fund, the largest government retirement program, owns no corporate stock at all. Federal law requires trust fund assets to be invested only in interest-bearing obligations of the United States government.4Office of the Law Revision Counsel. 42 US Code 401 – Trust Funds
Who Owns the Rest of the U.S. Stock Market
Seven percent puts pension funds well behind the biggest holders. The full breakdown as of early 2025:1Federal Reserve. Financial Accounts of the United States – L.224 Corporate Equities
- Households and nonprofits: roughly 42% ($46 trillion). This is the largest single category and includes individual brokerage accounts, IRA and 401(k) stock holdings, and equity owned by nonprofits.
- Mutual funds and ETFs combined: roughly 25% ($27.2 trillion). These intermediaries hold stock for their investors, including households, pension funds, and other institutions.
- Foreign investors: roughly 18% ($19.6 trillion). This includes foreign corporations, sovereign wealth funds, and overseas institutional investors, a share that has grown substantially over the past two decades.
- Insurance companies and banks: roughly 1.4% ($1.5 trillion combined).
The remaining few percent covers federal government holdings, broker-dealers, closed-end funds, and other financial entities. The household category is calculated as a residual, meaning the Fed subtracts every identified holder from the total and assigns whatever is left to households.3Board of Governors of the Federal Reserve System. FEDS Notes: Corporate Equities by Issuer in the Financial Accounts of the United States IRA equity, 401(k) equity, and individual brokerage portfolios all sit inside that 42%. There is no clean way to isolate the retirement portion from the Federal Reserve data alone.
Why the Pension Share Fell From 24% to 7%
Three overlapping forces have shrunk the pension fund slice over the past generation.
The Shift From Defined Benefit to Defined Contribution Plans
The most consequential change was structural. Section 401(k) of the Internal Revenue Code was added by the Revenue Act of 1978, and employer adoption surged after the IRS issued implementing regulations in 1981.5Library of Congress – Congressional Research Service. Contributions to Defined Contribution Retirement Plans Over the following decades, most large employers froze or closed their defined benefit plans and moved new hires into 401(k)-style plans. By 2017, 42% of Fortune 500 companies had frozen their primary defined benefit plan and another 24% had closed it entirely. When new retirement contributions flow into individual 401(k) accounts instead of a centrally managed trust, those dollars stop counting as pension fund holdings and start counting as household assets.
Corporate Derisking
The defined benefit plans that remain have been rotating away from stocks. Starting around 2006, private pension plans began adopting liability-driven investment strategies, shifting portfolios from equities toward long-duration bonds that better match future benefit payments.6Montana State Legislature. Issue Brief – How Do Public Pensions Invest? A Primer Newer accounting rules made pension expense volatility more painful on corporate balance sheets, giving executives a strong incentive to cut equity exposure even when stock returns were strong.
The Rise of Alternative Investments
Public pension funds have also been shifting dollars out of publicly traded stocks and into alternatives. By 2024, the average public pension fund allocated 31% of its assets to public equities, down from a peak of 34% in 2021. Alternatives (private equity, real estate, infrastructure) grew to 23% of the average portfolio, with private equity overtaking real estate as the dominant non-stock holding. Those assets do not appear in the corporate equities data at all, which further shrinks the pension share of the tracked market.
Why 7% Still Carries Outsized Influence
Seven percent of the U.S. stock market is still $7.9 trillion, and the concentrated nature of pension fund ownership gives these institutions influence that dwarfs what the percentage suggests. A single mutual fund investor with $50,000 in an index fund has no practical way to move a corporation’s board. A state pension system with $500 million in the same company can get the CEO on the phone.
Large public pension funds are among the most active shareholders in the country. CalPERS, the New York State Common Retirement Fund, and similar systems routinely file shareholder proposals, vote against management on contested issues, and engage boards directly on topics from executive pay to climate strategy. The New York State Common Retirement Fund alone has filed 185 proposals related to political spending disclosure since the Citizens United decision, and it reports persuading 61 companies to voluntarily adopt the requested disclosures. Public funds have also filed proposals in recent years at companies including Tesla and Starbucks on workplace and governance issues.
Pension funds also tend to be long-term holders, which shapes how markets behave. A fund managing money that will not be paid out for decades does not panic-sell during a downturn the way a retail investor might. That patient capital provides a stabilizing effect during periods of volatility. As pension funds continue to cut equity allocations through derisking and alternatives, one side effect is the gradual loss of that stabilizing presence in the equity market.