A recent article caught my attention and I thought I would share it here before some clients start coming to me with another “the dollar is collapsing” story.
Norway’s sovereign wealth fund which manages around USD2.3 trillion is proposing to reduce government bonds from 70% to 50% of its bond allocation. Based on current holdings, this could translate into roughly USD75 billion less in US Treasuries.
What caught my attention is that this is not really a move away from the US dollar. The dollar weighting of the bond portfolio hardly changes. It is more about moving away from Treasuries and allocating more towards other parts of the bond market while Japan actually gets a larger allocation.
Phew! I would not read this as Norway suddenly losing confidence in the US or making a big call on the dollar. Large funds adjust portfolios all the time especially when they think they can get better risk-adjusted returns somewhere else.
Still, when a USD2.3 trillion investor starts making changes of this size, it is worth watching. Yes, I can already hear the “this is the beginning of the end for the dollar” crowd warming up.