Sovereign wealth funds rotate from U.S. stocks to bonds | Reuters

Sovereign wealth funds rotate from U.S. stocks to bonds | Reuters

Sovereign wealth funds pulled $4.1 billion from United States stocks in the third quarter, while adding to their U.S. bond holdings by the most in at least three years, data showed on Wednesday.

Around $4.5 billion was sucked into U.S. fixed income, with the bulk into short-duration instruments, according to the eVestment data on strategies managed by third-party fund managers.

The activity came ahead of the U.S. presidential election in November, which sparked volatility on Wall Street in the week prior to the vote as investors worried about the possibility of a contested outcome and as coronavirus cases soared globally.

The exodus from U.S. stocks, the most in at least three years, was likely not driven by the need for cash for governments at home, said Elliot Hentov, head of policy research at State Street Global Advisors, noting that recent debt issuance by sovereign funds’ governments was up massively and that they had a decent cash pile ahead of the coronavirus crisis.

“The U.S. election may partially have been a driver and expectations of an eventual non-U.S. recovery picking up, as well as the fact that markets had recovered a lot by Q3 and, if well timed, it was an opportune moment to sell,” Hentov said.