INSUBCONTINENT EXCLUSIVE:
NEW YORK: Money managers rebalancing their portfolios to boost equity exposure into the end of the quarter may support the nascent stock
rally that has followed the steep coronavirus-fueled market drop.
With the S-P 500 having lost around a third of its value in the recent
selloff, investors may need to step up their equity purchases and sell bonds in order to maintain allocation targets.
A portfolio that had
stock allocations at 60 per cent and bond allocations at 40 per cent in mid-February may now be more evenly split between the two asset
allocations in several ways, including selling bonds to buy stocks, using the cash in their portfolios or putting fresh money toward
equities, said Leo Acheson, director of multi-asset ratings at Morningstar.
From speaking with portfolio managers, Acheson said many have
not been waiting for quarter-end to make adjustments and instead are revisiting their portfolios daily and adjusting the split between
following unprecedented stimulus measures from the Federal Reserve and United States Senate passage of a $2 trillion bill aimed at helping
unemployed workers and industries hurt by the coronavirus pandemic
Connecticut.
The flows generated by rebalancing appear to have a noticeable impact on asset prices, especially when bond performance
trounces that of equities, as has occurred so far in March.
On average, the S-P 500 has climbed nearly 7 per cent over the final five days
co-head of derivatives strategy at Susquehanna Financial Group, citing eight such previous occurrences in data back to 1990.
The iShares
Core US Aggregate Bond ETF (AGG.P) has fallen just 1 per cent so far in March, against an 11 per cent slide in the S-P 500 .SPX, as of
Thursday, though that performance gap narrowed this week.
Pensions, endowments and foundations - overseeing as much as $15 trillion in
assets - are among those that often look to adjust their portfolios around quarter end, said Steve Foresti, chief investment officer at