Norway's $2.3 trillion sovereign wealth fund has proposed a major restructuring of its bond portfolio that would significantly reduce its exposure to U.S. Treasury securities, potentially cutting the allocation by nearly $80 billion.

According to a report published by @coinbureau (X post), Norges Bank Governor Ida Wolden Bache and Norges Bank Investment Management CEO Nicolai Tangen recommended reducing the share of government bonds in the fund's benchmark bond index from 70% to 50%. Within that index, the allocation to U.S. Treasuries would fall from 34.1% to 21.9%.

The proposal was submitted to Norway's Ministry of Finance as part of a broader review of the fund's bond investment strategy. The recommendations do not yet constitute a completed portfolio transaction and would require further consideration before any changes are implemented. That review process matters because the fund, formally known as the Government Pension Fund Global, is built on the country's petroleum revenues and is widely tracked as the world's largest sovereign wealth fund, making its benchmark decisions a reference point for other large institutional investors.

U.S. Treasuries Face the Largest Proposed Reduction

The Government Pension Fund Global, managed by Norges Bank Investment Management, held about $215 billion in U.S. government debt as of June 2026, according to Reuters. Under the proposed adjustment, U.S. Treasuries would represent the largest source of the reduction in government-bond exposure.

Norges Bank said the proposed 50% government-bond allocation would remain sufficient to meet the fund's liquidity requirements, including during periods of financial-market stress. The central bank also argued that lowering the government-bond share could provide greater exposure to risk premiums elsewhere in fixed-income markets.

The proposal would not amount to a wholesale withdrawal from U.S. assets. Norges Bank is considering increasing exposure to non-government debt, including mortgage-backed securities and other government-related securities. As a result, the fund's overall U.S. dollar exposure would remain broadly stable.

Diversification Becomes a Key Focus

The proposed changes come as global bond markets face elevated yields, heavy government borrowing, and renewed concerns about concentration risk. For a fund of Norway's scale, even gradual changes to its benchmark can influence significant capital flows.

The fund's current benchmark already allocates 70% to equities and 30% to fixed income, with 70% of the fixed-income component allocated to government and related bonds.

Norges Bank has said any changes would be implemented gradually in order to limit market disruption and transaction costs. The recommendation will now move into Norway's broader policy review process, with the Ministry of Finance expected to determine how the benchmark should evolve. The next concrete step to watch is the Ministry of Finance's response, which will determine whether, when, and how the reduced government-bond weighting is put into effect.

Source: Hokanews