European markets need to get their act together, CEO of Norway’s $2 trillion wealth fund says. ‘The winner takes it all’

European markets are facing a crisis and must get their act together to fix it, the head of the world's biggest individual investor has said.

Speaking to CNBC's Charlotte Reed on the sidelines at the Euronext Annual Conference in Paris, France, Nicolai Tangen, CEO of Norges Bank Investment Management (NBIM), called on Europe to "get our act together" when it comes to unifying the continent's capital markets.

"Capital markets, we really need to get our act together. The winner takes it all," he said.

"People go where the liquidity is highest, where valuations are highest, and so it's really, really important to sort this out."

Tangen was speaking after his speech to the conference on Tuesday morning, when he said that, over the past decade, NBIM's equity portfolio had shifted notably in favor of U.S. stocks. During that period, European stocks went from making up 41% of the portfolio to 21%, while U.S. shares jumped from making up 37% of the equity portfolio to around 55%.

Nearly 40% of NBIM's investments are in U.S. equities, with its most valuable holdings including a 1.3% stake in Nvidia, a 1.2% stake in Apple and a 1.3% stake in Microsoft.

NBIM manages Norway's sovereign wealth fund, which was set up in the 1990s to invest revenues from the country's oil and gas industry. The fund is an investor in more than 7,200 companies across 60 countries and has stakes in around 1.5% of the world's publicly listed stocks.

The fund, the largest of its kind in the world, currently has a value of just over $2 trillion.

NBIM also invests in fixed income, real estate and renewable energy infrastructure.

Tangen told CNBC the changes in NBIM's equity holdings over the past 10 years were "an extraordinary shift" and attributed it to Europe lagging, behind when it comes to technology and innovation.

"It is because of the U.S. companies' dominant position in AI we do not have strong companies in Europe in that field," he said.

In 2025, the sovereign wealth fund posted an annual profit of 2.36 trillion kronor, or $246.9 billion, much of which was attributed to the strength of the tech sector.

"I think what Europe can do is, of course, be better at applying AI and there are some signs that, in terms of diffusion of technology, Europe is doing pretty well," Tangen said.

"It's urgent to do this," Tangen said of reforming European markets. "We cannot have such a fragmented capital market in Europe. We won't get the liquidity, we won't get the depth of the market."

Tangen said Europe needed to consolidate and implement more unified rules to make cross-border trade easier, or risk falling "further behind."

Market watchers and regional officers have spoken of the urgent need to overhaul European capital markets.

In January, IMF Managing Director Kristalina Georgieva called on European leaders to finalize the capital markets union, complete the energy union, make it easier for employers to secure labor from across the EU, and invest in research and innovation.

In his speech earlier in the day, Tangen said NBIM was an investor with "skin in the game," given its European headquarters and stakes in 2.3% of all listed European companies.

He outlined a "wish list" of changes: harmonizing financial and corporate legislation across the region, rethinking competition and innovation, and "fixing the plumbing" to allow capital to flow better through the system.

"Are European capital markets in a crisis?" he asked the audience. "Probably, but in that case, let us not waste a good crisis. We know what needs to be done. And it must be done, otherwise we will lose. We will fall. It is time to act."

In his CNBC interview, Tangen also said his team had been surprised by the stability of capital markets amid the ongoing U.S.-Iran war.

Asked how concerned NBIM is about the potential impact of elevated oil prices on the global economy and equity markets, Tangen said it was "of course worried about this."

"It's an additional risk, and an additional factor that we have to take into consideration when we look at our various scenarios," he said. "We are not in the business of predicting the oil price, but we do see that a higher oil price will have an inflationary effect, and that's one additional negative when it comes to the market."

International markets have been volatile since the U.S. and Israel launched strikes on Iran on Feb. 28, with surging oil prices sparking fears of an energy shock creating global inflationary pressure.

The MSCI World Index which includes mid- and large-cap stocks across developed markets — has moved 3.6% lower since the war began.

But Tangen argued that "markets are remarkably stable" given the backdrop of the ongoing conflict in the Middle East and pressure on energy costs. Asked if markets are being too complacent, he said it was difficult to say.

"We are surprised that they are so stable, and that they have not really reacted so much, because when we do scenario analysis and we look at some of the threats to markets … a lot of the things we are seeing playing out we would have expected to have a more negative effect on the market," Tangen told CNBC.

His comments echo those made by Goldman Sachs CEO David Solomon shortly after the war began, when he told an Australian conference that he was surprised by the "benign" market reaction to the strikes "given the magnitude" of the developments.