Norway's sovereign wealth fund has sold off its entire holdings in Irish and Portuguese government bonds, and reduced their share of Spanish and Italian bonds, in order to cut its exposure to the European debt crisis and make more investments in emerging markets.

According to the Financial Times, the Norges Bank Investment Management (NBIM) held nearly $15.6 billion in Portuguese, Italian, Irish, Greek and Spanish government bonds last year,though that figure has since been cut down by more than half amid a broader strategy to cut investments in Europe.

Holdings in Irish and Portuguese debt - at $650 million and $127 million respectively - for instance were completely wiped out, while the NBIM also cut its investments in Italy and Spain from $5.6 billion and $3.1 billion respectively to $4.6 billion and $2.6 billion.

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"We have sold proportionally more of government bonds in southern Europe than in other countries," said NBIM's chief executive Yngve Slyngstad.

"This has been a process that has been going on for two years," he added.

With its holdings in Europe reduced, the $600 billion-strong fund can now switch over to investing in government bonds from emerging markets such as Brazil, Indonesia, Mexico, India and South Korea.

These changes in its bond portfolio were revealed as part of its first quarter results, where the Norwegian fund recorded a 7.1 percent quarterly return - on the back of an 11 percent gain in its equity holdings. The fund's investments in euro-denominated government bonds on the other hand returned just 2.9 percent in the same quarter.

"We are concerned about the situation in the euro area. In many countries there are macroeconomic challenges," Slyngstad said.

Norway's reduction in eurozone debt also comes just after a public spat with the European Central Bank, when the fund expressed anger towards what it believed was a forced participation in Greece's $130 billion debt restructuring.

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The NBIM took issue with how the ECB, the European Investment Bank and possibly other official entities managed to get their holdings excluded from the writedowns, while retroactive use of so-called collective action clauses resulted in the fund taking a 53.5 percent face-value loss in its investment despite voting against the restructuring.

Predictability is important for a long-term investor and the euro area faces considerable structural and monetary challenges," Slyngstad warned.

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