Concerns about geopolitics are one of many factors involved in pension funds’ asset allocation decisions - yet they are often overemphasised by outsiders
It’s naïve to assume that there is no political element to asset allocation.
The US Treasury market is the world’s largest liquid pool of government bonds – and an essential element of the investment policies of countless investors. Non-US institutions own around 42% of today’s outstanding issuance of more than $28trn (€23trn). They have for many years been large holders of Treasuries – and their ongoing confidence in them has long been a matter of discussion.
China is now the third-largest holder and unsurprisingly its ownership has also been a matter of long-standing debate. But its holdings peaked at $1.3trn in 2013 (then €960bn) when it accounted for more than 20% of total foreign holdings of US government debt. China has since reduced its holdings from over $1trn at end-2020 to $682.5bn by November 2025, according to Trading Economics.
European pension funds’ exposure to US Treasuries is probably not high enough to warrant the attention that has been paid to it in recent weeks – in particular, following the publication of a research note by Deutsche Bank’s global head of FX research, George Saravelos, at the end of January.
Saravelos said European investors, including Danish pension funds, could sell US Treasuries in response to the trade war that President Trump briefly threatened at the end of January following his aggressive stance on Greenland. According to the Financial Times, US Treasury Secretary Scott Bessent later told the Davos World Economic Forum that Deutsche Bank CEO Christian Sewing had called him to say he “does not stand by” Saravelos.
European institutions certainly have historically had large holdings of US Treasuries – in particular as part of global bond mandates – and some have reduced these. While a few Danish and other pension funds have recently confirmed they would sell or reduce holdings of Treasuries and US assets, as IPE has reported, in most cases these decisions seem to arise from concerns other than Trump’s threats against Greenland, Denmark and NATO.
Pension fund asset allocators certainly have valid concerns about geopolitics – but these are wrapped up in a constellation of other worries. Investors are perturbed by the decline in the dollar, the ballooning US budget deficit and risks in AI.
It’s not just Danish pension funds that have reacted to these issues. ABP reduced its Treasuries holdings by nearly 37% between end-2024 and end-September 2025, according to figures provided by the pension fund. Its French state bond holdings declined by 3% over that period, while Bunds increased by 1.3%. These moves can also be seen in light of the changes implied by a new pension system in the Netherlands, which will see an overall reduction in fixed-income exposure.
The furore over Greenland might have calmed for now and Danish pension fund leaders may be relieved they have not faced stronger criticism from an audacious US administration that does not pull back from attacking erstwhile allies.
But in an era in which once straightforward asset allocation decisions can be freighted with a perception of malign intent, European pension funds should look to war game situations in which they may have to defend themselves and their members’ assets from belligerence and attack.
Liam Kennedy, Editorial Director
