Big Northern European investors are increasingly wary of the risks of holding U.S. assets in the face of geopolitical tensions, pensions chiefs told Reuters, a sign of a broadening shift away from the world’s biggest financial market.
A top investment adviser, three pension funds and a leading industry body said the risk premium attached to holding U.S. assets had also gone up in part because of worries about the nation’s finances.
Pension industry leaders and investment chiefs from Finland, Sweden and Denmark told Reuters they viewed U.S. foreign policy uncertainty and White House debt levels as a threat to the dollar, U.S. Treasuries and stocks.
The Nordic region is home to some of Europe’s biggest pension funds by assets.
This week two Nordic pension funds, Sweden’s Alecta and Denmark’s AkademikerPension, said they had sold or were in the process of selling their U.S. Treasuries.
While they said the decisions were unrelated to recent events, U.S. President Donald Trump’s ambitions for Greenland have revived speculation about Europe responding with financial protectionism to his administration’s policies.
“We’re having a lot of discussions (with clients) around (whether) it is time to tilt away from U.S. assets,” said Van Luu, global head of solutions strategy, fixed income and foreign exchange at Russell Investments, which advises retirement schemes.
Rare Public Debate
Shifts in long-term asset allocation take time to show up and the United States with its strong economy and deep markets remains a draw. U.S. stocks are trading near record highs. U.S. policy uncertainty, however, has pressured the dollar, which fell 10% against major currencies last year amid tariff hikes and other policies, and 30-year U.S. Treasury yields are trading at around 4.9% US30YT=RR, near levels reached during the global financial crisis.
The Nordic funds have been more vocal about their appetite for U.S. assets than others.
Alecta said it had sold most of its U.S. bond holdings because risk associated with U.S. Treasuries and the dollar had increased, while AkademikerPension said it would divest its holdings by the end of the month, blaming weak U.S. government finances.
AkademikerPension said the move was not intended as a political statement linked to the rift between Denmark and the United States over Greenland.
The public nature of the debate over U.S. assets is unusual for investors, who typically steer away from commenting on any changes that may be linked to current affairs.
Their long-term investment decisions tend to look past momentary events.
“All of this turmoil is raising some questions about how exposed you should be to the U.S… that is what our members are professionally assessing,” said Tom Vile Jensen, deputy director of trade body Insurance and Pensions Denmark.
While U.S. policy uncertainty is a risk factor for asset valuations, the funds said they wouldn’t withdraw capital for political reasons.
“There is certainly no weaponisation of capital. It is not the job of our sector to do that,” said Vile Jensen.