Credit Suisse Outline Quarterly Rebalancing Flows For Pension Funds

Late on Wednesday Credit Suisse noted that “based on the combination of strong MtD and QtD international equity performance vs. other asset classes, our model estimates ~$38bn to sell in international developed equities and ~$5bn to sell in emerging market equities.”

• “Stateside, given the underperformance of U.S. equities, our current projection is $23bn to buy as funds adjust allocations. Domestic fixed income lagged all equity segments. As a result, our model projects ~$20bn to buy.”
• “As we noted last year, volume trends in December do not lend themselves to trading size post rebalancing Friday. Volume the last week of the calendar year is especially light, ~30% lower than the Jan-Nov average.”
• “Pension teams appreciate liquidity as much as their peers, and given Dec volume trends, our usual caveats seem especially relevant. The actual timing of trades varies dramatically based on several different factors including market sentiment (short-term and long-term), asset mix, implementation costs, liquidity events, regularly scheduled cash flows, etc.”