North European Investors Reevaluate US Investments Amid Rising Geopolitical Risks
Big Northern European investors are increasingly wary of the risks associated with holding U.S. assets amid rising geopolitical tensions. This sentiment, expressed by pensions chiefs to Reuters, indicates a significant shift away from the world’s largest financial market.
According to a leading investment adviser, three pension funds, and a prominent industry body, the risk premium for U.S. assets has escalated, partly due to concerns regarding the nation’s financial stability. Investment leaders from Finland, Sweden, and Denmark have voiced their apprehensions about U.S. foreign policy uncertainty and the escalating debt levels under the current administration, viewing these factors as potential threats to the dollar, U.S. Treasuries, and equities.
Folksam, one of Sweden’s largest insurers, disclosed to Reuters that it sold its U.S. Treasuries in 2024, partly to mitigate risks ahead of the upcoming U.S. election.
The Nordic region is home to some of Europe’s largest pension funds by assets. Recently, two Nordic pension funds—Sweden’s Alecta and Denmark’s AkademikerPension—announced they had either sold or were in the process of divesting their U.S. Treasuries. While they emphasized that these decisions were not directly linked to recent geopolitical events, speculation has arisen regarding potential European financial protectionism in response to U.S. policies, particularly following President Trump’s ambitions concerning Greenland.
“We’re having numerous discussions with clients about whether it’s time to shift away from U.S. assets,” stated Van Luu, global head of solutions strategy for fixed income and foreign exchange at Russell Investments, which advises retirement schemes. “Approximately 50% of our clients are contemplating action, especially those from Northern Europe, including Scandinavia and the Netherlands.” Russell manages $636 billion directly and advises clients with assets totaling $1.6 trillion.
Rare Public Debate
Changes in long-term asset allocation typically take time to manifest, and the U.S., with its robust economy and deep markets, continues to attract investors. U.S. stocks are currently trading near record highs. However, U.S. policy uncertainty has pressured the dollar, which fell 10% against major currencies last year due to tariff hikes and other policies. Meanwhile, 30-year U.S. Treasury yields are hovering around 4.9%, nearing levels seen during the global financial crisis.
The Nordic funds have been notably vocal about their diminishing appetite for U.S. assets. Alecta reported that it had sold most of its U.S. bond holdings due to increased risks associated with U.S. Treasuries and the dollar. AkademikerPension plans to divest its holdings by the end of the month, citing concerns over weak U.S. government finances, although it clarified that this move is not a political statement related to the Greenland issue.
The public nature of this debate is unusual for investors, who typically refrain from commenting on changes linked to current affairs. Their long-term investment strategies usually overlook transient events. “All of this turmoil raises questions about how exposed one should be to the U.S.,” remarked Tom Vile Jensen, deputy director of the trade body Insurance and Pensions Denmark. While acknowledging U.S. policy uncertainty as a risk factor for asset valuations, the funds affirmed they would not withdraw capital for political reasons. “There is certainly no weaponization of capital. It is not the role of our sector to engage in that,” Jensen added.
Very Much Investable
Despite the rising risk premium, the U.S. remains an investable market, according to Annika Ekman, EVP of Investments at Finland’s Ilmarinen, which manages over 65 billion euros ($76.1 billion). Finnish pension provider Veritas is adhering to its investment mandates, though CIO Laura Wickstrom acknowledged that U.S. policy uncertainty poses risks for the dollar. “The higher the unpredictability, the more challenging the environment becomes,” she noted.
U.S. policy uncertainty has also increased the appeal of alternative assets, such as gold. Folksam reiterated its decision to sell U.S. Treasuries in 2024 to reduce risks ahead of the election. “There’s a lot of discussion right now, but for the moment, I believe it’s essential to maintain a cool head,” commented Jonas Thulin, CIO at Sweden’s AP3, which manages approximately $61 billion in pension assets.
($1 = 0.8546 euros)
(Reporting by Naomi Rovnick, Simon Johnson, and Simon Jessop; additional reporting by Yoruk Bahceli; writing by Dhara Ranasinghe; editing by Elisa Martinuzzi and Susan Fenton)
Big Northern European investors are increasingly wary of the risks associated with holding U.S. assets amid rising geopolitical tensions. This sentiment, expressed by pensions chiefs to Reuters, indicates a significant shift away from the world’s largest financial market.
According to a leading investment adviser, three pension funds, and a prominent industry body, the risk premium for U.S. assets has escalated, partly due to concerns regarding the nation’s financial stability. Investment leaders from Finland, Sweden, and Denmark have voiced their apprehensions about U.S. foreign policy uncertainty and the escalating debt levels under the current administration, viewing these factors as potential threats to the dollar, U.S. Treasuries, and equities.
Folksam, one of Sweden’s largest insurers, disclosed to Reuters that it sold its U.S. Treasuries in 2024, partly to mitigate risks ahead of the upcoming U.S. election.
The Nordic region is home to some of Europe’s largest pension funds by assets. Recently, two Nordic pension funds—Sweden’s Alecta and Denmark’s AkademikerPension—announced they had either sold or were in the process of divesting their U.S. Treasuries. While they emphasized that these decisions were not directly linked to recent geopolitical events, speculation has arisen regarding potential European financial protectionism in response to U.S. policies, particularly following President Trump’s ambitions concerning Greenland.
“We’re having numerous discussions with clients about whether it’s time to shift away from U.S. assets,” stated Van Luu, global head of solutions strategy for fixed income and foreign exchange at Russell Investments, which advises retirement schemes. “Approximately 50% of our clients are contemplating action, especially those from Northern Europe, including Scandinavia and the Netherlands.” Russell manages $636 billion directly and advises clients with assets totaling $1.6 trillion.
Rare Public Debate
Changes in long-term asset allocation typically take time to manifest, and the U.S., with its robust economy and deep markets, continues to attract investors. U.S. stocks are currently trading near record highs. However, U.S. policy uncertainty has pressured the dollar, which fell 10% against major currencies last year due to tariff hikes and other policies. Meanwhile, 30-year U.S. Treasury yields are hovering around 4.9%, nearing levels seen during the global financial crisis.
The Nordic funds have been notably vocal about their diminishing appetite for U.S. assets. Alecta reported that it had sold most of its U.S. bond holdings due to increased risks associated with U.S. Treasuries and the dollar. AkademikerPension plans to divest its holdings by the end of the month, citing concerns over weak U.S. government finances, although it clarified that this move is not a political statement related to the Greenland issue.
The public nature of this debate is unusual for investors, who typically refrain from commenting on changes linked to current affairs. Their long-term investment strategies usually overlook transient events. “All of this turmoil raises questions about how exposed one should be to the U.S.,” remarked Tom Vile Jensen, deputy director of the trade body Insurance and Pensions Denmark. While acknowledging U.S. policy uncertainty as a risk factor for asset valuations, the funds affirmed they would not withdraw capital for political reasons. “There is certainly no weaponization of capital. It is not the role of our sector to engage in that,” Jensen added.
Very Much Investable
Despite the rising risk premium, the U.S. remains an investable market, according to Annika Ekman, EVP of Investments at Finland’s Ilmarinen, which manages over 65 billion euros ($76.1 billion). Finnish pension provider Veritas is adhering to its investment mandates, though CIO Laura Wickstrom acknowledged that U.S. policy uncertainty poses risks for the dollar. “The higher the unpredictability, the more challenging the environment becomes,” she noted.
U.S. policy uncertainty has also increased the appeal of alternative assets, such as gold. Folksam reiterated its decision to sell U.S. Treasuries in 2024 to reduce risks ahead of the election. “There’s a lot of discussion right now, but for the moment, I believe it’s essential to maintain a cool head,” commented Jonas Thulin, CIO at Sweden’s AP3, which manages approximately $61 billion in pension assets.
($1 = 0.8546 euros)
(Reporting by Naomi Rovnick, Simon Johnson, and Simon Jessop; additional reporting by Yoruk Bahceli; writing by Dhara Ranasinghe; editing by Elisa Martinuzzi and Susan Fenton)
