World’s biggest sovereign wealth fund plans to cut U.S. Treasury holdings

Norway’s massive sovereign wealth fund is looking to shake up its investment strategy by scaling back its reliance on government bonds, most notably U.S. Treasurys. In a letter sent to the country’s finance ministry, leadership at Norges Bank Investment Management proposed dropping the government subindex of its bond holdings from 70 percent down to 50 percent. This strategic pivot aims to diversify risk and chase higher returns across a broader range of assets within its staggering 2.3 trillion dollar portfolio.

Under the new plan, the fund would gradually trim its Treasury holdings from roughly 34 percent to just under 22 percent, while also slightly reducing its exposure to Eurozone bonds. To offset these cuts, the fund intends to lean more heavily into non-government U.S. fixed income, such as corporate bonds, and cautiously increase its stake in Japanese government securities. Perhaps most surprising is the desire to venture further into mortgage backed securities, which officials believe can act as a hedge against equity volatility despite their notoriety during the 2008 financial crisis.

Market analysts suggest that while the sheer volume of this shift might not trigger an immediate collapse, the timing sends a concerning signal about American fiscal health. Economist Mohamed El Erian noted that with global giants like China and Japan already under pressure, seeing another traditional buyer step away highlights growing anxiety over the U.S. debt trajectory and rising long dated yields. It suggests that the safe haven status of Treasurys may be losing some of its luster among the world’s largest institutional investors.

This push for diversification comes after a period of erratic performance fueled by an aggressive bet on technology and artificial intelligence stocks. While those investments have yielded record profits recently, CEO Nicolai Tangen has cautioned that such growth is unsustainable in a downturn. A recent internal stress test revealed that an AI market correction could potentially wipe out nearly 740 billion dollars of the fund’s value, prompting this renewed focus on balancing stability with yield through a more varied asset mix.