Big-name funds are pulling back from the US, rebalancing portfolios

Big-name funds are pulling back from the US, rebalancing portfolios toward Europe and other overseas markets as the country’s political and economic risks pile up.

This new rotation is driven by rising US debt, unstable trade policy, and a weakening dollar—factors that now have even the most committed American investors looking elsewhere.

According to Financial Times, several major asset managers have already begun reducing their positions in US assets and redirecting money abroad.

President Donald Trump’s latest round of tariffs, announced without warning, caused a sharp response in global markets and sent the dollar tumbling to a three-year low.

As the president keeps targeting foreign partners with protectionist policies, confidence in American stability is being tested across institutional investment desks.

Executives voice concerns over the us outlook

Seth Bernstein, CEO of the $780 billion AllianceBernstein, said it plainly: “People need to rethink their exposure to the US.” He warned that the country’s deficit—expected to balloon by $2.4 trillion over the next decade because of Trump’s tax bill—is no longer something investors can ignore.

“It is untenable for the United States to continue borrowing at the pace it’s borrowing,” Seth said. He added that unpredictability in US trade policy should force a hard look at portfolio concentration. “How much do you want concentrated in one market?”

A senior figure at a leading American private equity firm described Trump’s declaration of a “liberation day”—the day sweeping tariffs were unveiled—as “a wake-up call to a lot of people that they were overweight the US.” The message hit hard. Investors began to reconsider their exposure, not out of preference, but because conditions demanded it.

One of the most notable actions came from Caisse de dépôt et placement du Québec, Canada’s second-largest pension fund. The company said it was actively cutting its US holdings, which currently make up 40% of its portfolio.

In its place, more funds will go into Europe, with targeted investments in the UK, France, and Germany. Howard Marks, co-founder of the $203 billion alternatives company Oaktree Capital Management, said he’s hearing investors start to question whether “US exceptionalism is a little less exceptional.”

Capital flows into Europe as US assets lag

Even as US markets recovered from Trump’s tariff announcements, returns have been underwhelming. The S&P 500 is up less than 2% this year, while Europe’s Stoxx 600 has climbed 9%.

Meanwhile, the dollar’s 9% fall highlights just how fragile confidence in American leadership has become, even though the administration has backed off on many of the proposed tariffs.

Richard Oldfield, CEO of UK-based Schroders, confirmed that his company is already seeing “early signs” of reduced US engagement by large investors. On the ground, the trend is being backed by portfolio adjustments.

German markets in particular are drawing attention. A €1 trillion government investment plan targeting defense and infrastructure has investors anticipating stronger growth.

Tom Nides, vice chair at Blackstone, said, “Governments are relatively stable here. Shifting money to Europe is certainly not a bad bet.” This view is increasingly being echoed by money managers who now prefer the relative calm of European politics over Washington’s unpredictability.

Joana Rocha Scaff, head of European private equity at Neuberger Berman, revealed that 65% of the firm’s private equity co-investments this year have been in Europe, up from 20–30% in recent years. She explained that interest in Europe is driven not just by tariffs, but also by broader macro factors. “It’s not just the trade wars but some of the domestic instability and proposed tax bills that impact non-US investors,” Joana said.

Still, not everyone sees Europe or Asia as perfect alternatives. Howard from Oaktree raised concerns that Europe remains heavily regulated and economically sluggish, while China remains complicated for foreign investors to navigate. “Where else can large amounts of capital be deployed?” he asked.

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