US. Pensions May Yank Up to $1 Trillion From Stocks to Trim Risk
Pension funds are poised to shift as much as $1 trillion from stocks to bonds in coming years to lock in gains and limit the potential for big losses, according to Wells Fargo & Co.
“Definitely there’s a lot of money that will want to move,” said Andy Hunt, head of global credit and liability-driven investing at Wells Fargo Asset Management, predicting it will happen within roughly five years. “Best case, it’ll be between a half a trillion and a trillion.”
Struggling to make up a shortfall in funding, many pensions held on to large equity portfolios, trying to juice returns as ultra-low interest rates squeezed yields on bonds. But even a rally in the $27 trillion U.S. stock market wasn’t enough to fix the problem. Now, with corporations taking steps to narrow the gaps, managers are shifting to less volatile assets.
Fear of getting burned may even accelerate the trend, Hunt said in an interview.
The S&P 500’s record high earlier this month has raised concerns among some prominent investors that a correction may be nearing. Pacific Investment Management Co. predicts a 70 percent chance of a recession in the next three to five years, but said investors should start reducing risk
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