NEW YORK — Pension funds are expected to sell about $10 billion in equities in the fourth quarter, but it should not lead to a significant sell-off in the equity markets, according to a report by Goldman Sachs & Co., New York.
The report, written by Joanne M. Hill, managing director and head of equity derivatives strategy, estimates that defined benefit pension funds now are 3.1%, or $65 billion, overweighted in equities. This level seems to be where plans are compelled to act, according to the report. Ms. Hill said the overweighting of equities relative to bond holdings is actually about $32 billion, because some plans don't rebalance.
"When you look at the numbers, if all pension funds were to rebalance, $32 billion would come out of equities," according to Ms. Hill. But she doesn't expect this to happen.
Although pension funds reached critical levels for rebalancing in August, many wait until a new quarter to implement their shifts, according to the report. Beginning this month, Ms. Hill expects to see more movement out of stocks into bonds, but offsetting trends lead her to be more cautious about the expected intensity of net selling.
"There's a lot of discretion here," she said. "If the market is strong there is less selling, but if the market is flat more funds would tend to rebalance."