According to a report by Bloomberg , as U.S. stocks performed strongly in the first quarter, Goldman Sachs Group believes that pension funds may sell about $32 billion in stocks to rebalance their positions. And are there any opportunities for these funds from selling stocks to flow into Bitcoin ETFs?
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ToggleGoldman Sachs predicts retirement funds will sell 32 billion stock positions
Analysts from Goldman Sachs' FICC and equity teams pointed out in a report on March 26 that due to the strong performance of the U.S. stock market in the first quarter, pension funds may sell approximately US$32 billion in stocks to rebalance their positions, which will be the first step since 2023. The biggest adjustment since June this year.
Institutional investors and pension funds often have strict capital allocation limits and are required to review their market exposure at the end of the month and quarterly. But while the S&P 500 is up 8.8% since the start of 2024, global bonds are down about 2%, meaning funds may need to sell more stocks than usual to rebalance.
What is rebalance?
Rebalancing is a very important mechanism for long-term asset allocation. It is not difficult to understand from the literal meaning, which is to rebalance the investment portfolio.
Let’s illustrate with the most common traditional asset allocation of six stocks, six bonds, and four.
At the beginning of the period: Investors invest 100 US dollars, 60 US dollars in the stock market, and 40 US dollars in the bond market.
End of period: The $60 stock rises to $90 and the $40 bond falls to $30. Total assets rise to $120.
At this time, due to the rise of the stock, it has deviated from the 60% weight of $72, so some stocks need to be sold; conversely, bonds of $18 need to be purchased to bring the weight back to 40%.
Rebalancing design not only maintains the original intention of asset allocation, but also has the effect of adding more value on dips and taking profits. It is an important lesson for those engaged in long-term asset investment allocation. For example, Ark Investment has been selling Coinbase stocks recently because its stock price has risen too much and needs to be sold for rebalancing to maintain its existing weight.
Will money flow into Bitcoin ETFs?
And are there any opportunities for these funds from selling stocks to flow into Bitcoin ETFs? Since retirement funds have certain risk controls and requirements for investment targets, Bitcoin exposure must be invested through mining stocks or related stocks such as micro-strategies. However, since the United States officially approved the issuance of Bitcoin spot ETFs in January, it has become easier for investors to obtain Bitcoin-related exposure and rewards through ETFs.
The Arizona Senate previously passed a resolution requiring legislators and state pension funds to consider including Bitcoin spot ETFs in some investment portfolios.
As for whether funds will really flow into the Bitcoin spot ETF as expected by the community, we can probably only wait for the 13F report in mid-May to see the truth!
