Norway's sovereign wealth fund, Norges Bank Investment Management (NBIM), has proposed reducing the allocation of government bonds in its $2.3 trillion investment portfolio, primarily impacting its holdings of U.S. Treasurys. The fund aims to diversify its risk exposure and enhance returns. In a letter to the Finance Ministry made public on September 4, 2026, NBIM recommended decreasing the government subindex of its bond holdings from 70% to 50%, which it stated would provide sufficient liquidity during market turbulence while allowing for greater returns elsewhere.
The proposed reallocation would gradually reduce NBIM's Treasury holdings from 34.1% to 21.9%, decrease its euro area holdings from 16.8% to 14.1%, and increase its share of Japanese government bonds from 4.6% to 7.4%. Additionally, NBIM intends to begin weighting its government bond holdings by market value rather than gross domestic product due to the high debt levels of most developed economies.
This potential shift comes at a critical time for the Treasury market, with long-dated yields reaching decade-highs as investors express concerns over the U.S. fiscal trajectory and increasing debt load. Economist Mohamed El-Erian commented on CNBC that "reliable buyers and holders of U.S. Treasurys are under pressure," referencing Japan, China, and Gulf countries.
El-Erian noted that while the size of NBIM's proposed reduction is not significant, the signal that traditional holders and buyers are becoming less reliable is important. Furthermore, NBIM plans to increase its holdings of nongovernment U.S. fixed income, such as corporate bonds, from 16.2% to 27.6%.
CEO Nicolai Tangen and Norway's central bank chief, Ida Wolden Bache, indicated that the fund could achieve higher premiums by diversifying into riskier assets, including mortgage-backed securities, which they believe are well-positioned for long-term investment. They stated that mortgage-backed securities, which gained notoriety during the 2008 financial crisis, tend to move inversely to equities during crises, potentially providing an "additional reduction of volatility" similar to government bonds.
Currently, NBIM holds approximately $1.65 trillion in equities, representing nearly 1.5% of all shares in the world's listed companies, and $592 billion in fixed income. Established in 1998 to invest revenues from Norwegian oil with strict guidelines for longevity, the fund has reported record profits in recent quarters from substantial investments in U.S. and Asian tech firms and beneficiaries of the artificial intelligence boom, including semiconductor stocks.
However, Tangen has cautioned that such levels of returns may not be sustainable in the event of a market downturn. In the first quarter of 2025, the fund experienced a $40 billion loss as investors adopted a risk-off approach. A recent stress test by NBIM indicated that an AI correction could potentially erase $740 billion, or 35%, of its value.