OSLO/LONDON — The manager of Norway’s Government Pension Fund Global, the world’s largest sovereign wealth fund, has recommended a major overhaul of its fixed-income benchmark that would reduce its exposure to US Treasuries by roughly $80 billion.
In a letter to the Ministry of Finance, Norges Bank Investment Management (NBIM) proposed lowering the weighting of government bonds in the fund’s bond index from 70% to 50%. The change would free up capital for higher-yielding assets such as US agency mortgage-backed securities (MBS) and bonds issued by multilateral development banks, while keeping overall US dollar exposure almost unchanged.
According to estimates based on the fund’s holdings at the end of June 2026, the adjustment would cut global government-bond allocations by about $106 billion, with the bulk of the reduction coming from US Treasuries. The fund’s US Treasury weighting within the bond index would fall from 34.1% to 21.9%. Japanese government bonds would see a modest increase, while eurozone sovereign debt would decline slightly and UK gilts would remain largely stable.
NBIM emphasised that the move is an internal portfolio rebalancing rather than a withdrawal from US assets. “A government share of 50% will be sufficient to cover the liquidity needs, including in periods of turbulence in financial markets,” the letter stated. The remaining portion of the bond portfolio would be used to capture additional risk premia.
The fund also recommended switching the government-bond sub-index from GDP-based weighting to market-capitalisation weighting and formally including agency MBS and certain government-related bonds in the benchmark. Agency MBS, which carry guarantees from Fannie Mae, Freddie Mac and Ginnie Mae, offer near-sovereign credit quality with a yield premium over Treasuries.
The proposal remains under review. The Ministry of Finance is expected to complete its assessment by early 2027, with any final framework submitted to parliament later that year. Even if approved, the reallocation would be implemented gradually to minimise market disruption and transaction costs.
Fixed income currently accounts for just under 30% of the fund’s roughly $2.3–2.4 trillion in assets. Officials have stressed that total US dollar exposure in the bond portfolio would edge down only marginally, from about 52.9% to 52.5%, as money leaving Treasuries would largely shift into other dollar-denominated instruments.
The recommendation reflects a broader effort by large long-term investors to optimise fixed-income portfolios amid elevated government debt levels and higher bond yields across developed markets.