The world's largest sovereign wealth fund warns: European capital markets are facing a crisis

On March 17, the Financial Association reported (Editor: Niu Zhanlin) that the head of Norway’s sovereign wealth fund has recently warned that European capital markets are facing a crisis and must take swift action to repair it.

Nicolai Tangen, CEO of Norges Bank Investment Management (NBIM), stated on Tuesday that Europe “must act quickly” in terms of capital market integration. “In the capital markets, we really need to get our act together; the winners will take all. Money always flows to the most liquid and highly valued markets, so addressing this issue is crucial.”

He pointed out in his speech that over the past decade, NBIM’s stock portfolio has significantly tilted towards U.S. stocks. During this period, the proportion of European stocks in the portfolio dropped from 41% to 21%, while the share of U.S. stocks surged from 37% to about 55%.

Currently, nearly 40% of NBIM’s investment is allocated to U.S. stocks, with its most valuable holdings including: 1.3% of Nvidia, 1.2% of Apple, and 1.3% of Microsoft.

NBIM manages Norway’s sovereign wealth fund, which was established in the 1990s to invest the revenues from Norway’s oil and gas industry for the long-term wealth of all Norwegian citizens. The fund invests in over 7,200 companies across 60 countries globally, holding about 1.5% of the world’s listed company stocks.

As the world’s largest sovereign wealth fund, its asset size has now exceeded $2.2 trillion. In addition to stocks, the fund also invests in fixed income, real estate, and renewable energy infrastructure.

Tangen stated that the changes in stock allocation over the past decade represent “an extraordinary shift,” attributed to Europe’s lag in technology and innovation. “Due to the dominance of American companies in the field of artificial intelligence, Europe lacks strong enterprises in this area.”

He believes one measure Europe can take is to better utilize AI. He remarked, “In terms of technological diffusion, there are actually some positive signs emerging in Europe.”

However, he also emphasized that reform is urgent. “We cannot continue to maintain such a fragmented capital market structure; otherwise, we will not be able to form sufficient liquidity and market depth.” He pointed out that Europe needs to push for integration and establish more unified rules to facilitate cross-border transactions; otherwise, it will “fall further behind.”

Market observers and regional officials have repeatedly stressed the urgency of reforming European capital markets. In January of this year, International Monetary Fund President Kristalina Georgieva called on European leaders to accelerate the development of the Capital Markets Union, improve the Energy Union, lower barriers to cross-border labor mobility, and increase investment in research and innovation.

Tangen noted that as “a vested investor,” NBIM is headquartered in Europe and holds about 2.3% of the shares of listed companies in Europe. “Is the European capital market in crisis? Perhaps. But if so, we should not waste this crisis. We already know what to do—action must be taken, or we will fail and be eliminated. Now is the time to act.”

Tangen also mentioned that, in the current context of the U.S.-Iran conflict, the stability of capital markets has surprised his team. When asked about the potential impact of rising oil prices on the global economy and stock markets, he stated, “We certainly are concerned about this. It is an additional risk and an important factor we must consider in our scenario analysis.”

“We do not attempt to predict oil prices, but one thing is certain: rising oil prices will bring inflationary pressure, which is a negative factor for the market.”