Proposal № 065 of 250 · Released September 6, 2026
The Index Rule
Norway's fund owns about 1.5 percent of every listed company on earth, 9,000 of them in 70 countries, and picks almost none of them. It tracks an index, by law, at a cost of about a twentieth of a percent a year, and it returned 15 percent in 2025. An American fund that let a manager, a committee or a Congress choose its stocks would be a slush fund within a decade. Write the rule in: buy the world at market weight, pick nothing, cap the fee, and vote the shares by a published policy that no official may touch.
The problem
Every large pool of public money attracts two kinds of people: those who want to manage it for a fee, and those who want to direct it toward a purpose. Both are sincere. Both, over time, destroy the pool. State pension funds pay billions a year to managers who, by the most thorough long-run study of the question, underperform a plain index about nine times in ten over fifteen years. State development funds are steered toward a governor's project and a senator's district until they are indistinguishable from the budget. № 001 proposed a fund large enough to pay every citizen a dividend, and the first question any honest reader asks is: who decides what it buys?
Norway answered that question in 1998 and the answer has held through nine governments. Its Government Pension Fund Global was worth 21,268 billion kroner at the end of 2025, about two trillion dollars, and it holds shares in about 9,000 companies in more than 70 countries, roughly 1.5 percent of every listed company on earth. It chooses almost none of them. The fund's equity portfolio tracks the FTSE Global All Cap index and its bonds track a global aggregate; the manager is permitted a narrow band of deviation, and the rest is mechanical. At the end of 2025 it was 71.3 percent equities, 26.5 percent bonds, and less than 2 percent in real estate and infrastructure. It returned 15.1 percent in 2025 and its costs run around five hundredths of one percent of assets a year.
The Norwegian rule has one further feature that is easy to miss: the fund owns nothing in Norway. Every krone is invested abroad, so that no Norwegian company, town or minister can ask it for anything, and so that the fund cannot be used to inflate the economy it is meant to protect. An American fund cannot go quite that far, because the United States is about sixty percent of the world's stock market and excluding it would be a strange bet against the country. But it can adopt the principle: the fund is not an instrument of industrial policy, and no one in government may direct a dollar of it toward a company, a sector or a state.
The proposal
The Index Rule, in statute: the American Permanent Fund holds the world's listed companies and bonds at their market weight, tracking published indexes, with a tracking-error limit, a cost cap of one-tenth of one percent of assets, no more than five percent in unlisted assets, and a prohibition on any official directing an investment. Exclusions only by a published statutory list. The shares are voted by the trustees under a published policy, never by the Treasury.
How it would work
- Buy the world, at weight. The fund holds equities in proportion to their share of the global market, which today puts roughly sixty percent in American companies and forty abroad, and bonds likewise. It does not overweight America, because a fund that pays a dividend to Americans from American profits alone rises and falls with the American economy at the same time as the people it pays. Diversification is the whole point of owning the world.
- Pick nothing. No manager, committee, trustee or official may select a company. The statute names the indexes and permits a tracking error, as Norway's mandate does, wide enough to trade efficiently and no wider. A trustee who wants the fund to own more of something has exactly one route: persuade Congress to change the index in public.
- Cap the cost. Total management cost may not exceed 0.10 percent of assets in any year, double Norway's actual cost and a tenth of what active management charges. On a fund of a trillion dollars, the cap is one billion; the active alternative would be five to ten. The saving alone is a dividend.
- Five percent in the dark, no more. Unlisted assets, private equity, infrastructure, real estate, are capped at five percent, because they are where fees hide, valuations are argued rather than observed, and a politician's favourite project can be dressed as an investment. Norway holds under two percent and has done fine.
- Exclusions by list, not by discretion. The fund will be asked to sell tobacco, weapons, oil, or a country, every year, by someone sincere. The rule is that the fund excludes only what a statute names, on a list published in the law, and the trustees have no power to add to it. A citizen who wants the fund out of an industry may ask Congress. A manager who wants it out of one may resign.
- Vote the shares, by policy, not by politics. A fund that owns 1.5 percent of everything has a vote in everything, and a Treasury Secretary with that vote is a menace. The trustees of № 066 vote the shares under a written policy, published in advance, that covers board independence, executive pay and disclosure and nothing else; the policy may be changed only after public comment, and no official outside the trustees may communicate a voting preference. The alternative, adopted by some American index funds, of passing the vote through to the beneficial owner, is offered as an option for any citizen who wants their share's vote.
- Publish everything. Every holding, every trade, every fee, and every vote, on the Shareholder's Report of № 050, at the same cadence Norway publishes. A fund that hides a position is a fund that has one to hide.
The numbers
What indexing saves. On a fund of $1 trillion, a cost of 0.05 percent is $500 million a year; a typical actively managed public pension pays 0.5 to 1 percent, or $5 to $10 billion. Over thirty years, compounded, the difference is on the order of $300 billion, which is a dividend of roughly $1,000 per citizen that a picked portfolio would have paid to its managers instead.
What picking costs. S&P's persistent study of active managers finds that over fifteen years about 90 percent of large-cap funds trail their benchmark. There is no reason to believe a public fund's managers, chosen with a senator's help, would land in the other ten.
What Norway shows. Nine governments, one financial crisis, one pandemic, and a decade of pressure to spend the fund on everything from roads to housing: the index rule held, and the fund grew from nothing to two trillion dollars in twenty-eight years. The rule is the reason it is still there.
The honest objections
"A government that owns 1.5 percent of every company is state capitalism." This is the strongest objection and the one Norway's design exists to answer. The fund owns, but it does not direct; it picks nothing, it votes by a published policy on governance alone, and no minister may tell it what to do. The honest concession is that the line holds only as long as the rule does, which is why the rule is in statute, the voting policy is public, and the pass-through option lets any citizen take their vote out of the trustees' hands altogether. A fund that abandoned the Index Rule would be state capitalism. That is the argument for never abandoning it.
"Indexing means the fund buys whatever is already expensive." It buys everything at the weight the market assigns, which means it owns the expensive and the cheap alike and never has to guess which is which. The alternative is guessing. The record of institutions that guess with public money is above.
"Five percent in unlisted assets leaves the best returns on the table." Perhaps. Private markets have returned well for some investors, net of fees that are the highest in finance, with valuations that the investors themselves set. Norway's return in 2025 with under two percent in them was 15.1 percent. The cap is a choice to take the return the market offers rather than the one a manager reports, and the proposal is honest that it may cost something for the certainty.
"Congress will change the index to favour American companies the first time a factory closes." It may try, and the rule makes the attempt visible: a change to the index is a vote in the open to make every citizen's dividend less diversified. That is a fight worth having in daylight, and it is the only way the rule can be changed.
"The fund will be pressured to divest from something every year." It will, and item 5 is written for exactly that: the trustees cannot, and Congress can, by adding to a public list. The pressure moves from a boardroom to a hearing, which is where a democracy's arguments about its money belong.
Sources
- Norges Bank Investment Management, Government Pension Fund Global, Annual Report 2025, fund value, asset mix, holdings, return and cost, nbim.no
- Norwegian Ministry of Finance, Management mandate for the Government Pension Fund Global, benchmark indexes and tracking-error limit; White Paper on the Government Pension Fund 2025
- S&P Dow Jones Indices, SPIVA U.S. Scorecard, fifteen-year active-versus-index results, spglobal.com
- Boston College Center for Retirement Research, on investment costs and returns of U.S. state and local pension plans
- Proposals № 001 (The American Dividend); № 009 (The Permanent Fund Compact); № 023 (The Debt Covenant); № 050 (The Shareholder's Report); № 066 (The Trustees, forthcoming)