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Norway Fund Shifts Billions From US Debt
4 Sep
Summary
- Norway's fund may cut US government debt to 22% from 34%.
- Proposed shift focuses on increasing US mortgage-backed securities.
- Overall US dollar weighting in the bond index will slightly decrease.
The manager of Norway's substantial $2.3 trillion sovereign wealth fund has put forward a proposal to decrease its allocation to U.S. government debt. This significant portfolio adjustment, detailed in a September 1 letter to the finance ministry, aims to enhance investment returns by diversifying bond holdings.
The fund's manager, Norges Bank Investment Management, recommended reducing the weighting of government bonds within its benchmark index to 50% from 70%. This move would see U.S. Treasuries potentially fall to 22% of the index, down from the current 34%.
However, the proposed strategy involves a notable increase in investments in U.S. non-government debt, particularly state-backed mortgage securities, which would rise from 16.2% to 27.6%. Consequently, the overall exposure to the U.S. dollar within the bond index is projected to decline only slightly, from 52.9% to 52.5%.
