The manager of Norway's $2.4 trillion sovereign-wealth fund proposed cutting its holdings of government bonds and adding riskier debt to boost returns, a move that would shrink its portfolio of U.S. Treasurys by about $80 billion.

Norges Bank Investment Management--the arm of the central bank that manages the world's largest sovereign-wealth fund, commonly known as the oil fund--said in a letter to Norway's finance ministry that the portion of its bond portfolio allocated to government debt should be cut to 50% from 70%.

Rising concerns about global government debt levels and rekindled inflation fears due to the Middle East conflict have fueled a recent global bond sell-off, pushing yields to multiyear highs around the world.

Norway's sovereign-wealth fund had a market value of 22.683 trillion Norwegian kroner ($2.441 trillion) as of June 30. Fixed income accounts for just under 26% of the overall fund's investments.

The proposed changes would see the fund's exposure to U.S. Treasurys fall to 21.9% of its bond portfolio from 34.1% currently.

This would lead to a roughly $80 billion reduction in the fund's U.S. Treasury holdings, according to Dow Jones Newswires calculations. The proposed changes would also result in a cut of about $17 billion to the fund's holdings of eurozone government bonds and an increase of around $17 billion in its Japanese government debt, according to the calculations.

The fund said a 50% share of government bonds provides a comfortable margin to cover liquidity needs, even at times of market turbulence, and that holding more represents an implicit cost in the form of a lower expected return. The remaining part of the fund's bond portfolio should provide exposure to more sources of risk premiums in the bond market, it added.

This would be offset by riskier products such as mortgage-backed securities, which were removed from the fund's bond index in 2012, it said.

During the 2008 financial crisis, Norges Bank said it found exposure to illiquid private mortgage-backed securities difficult to manage, but noted that the segment is now standardized and liquid.

"The bonds are guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, and the credit quality is close to that of U.S. government bonds," the fund added.

The letter from Norges Bank responded to questions from Norway's finance ministry earlier in the year about the weighting of the fund's bond portfolio.