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If volatile markets persist, pension funds may flee to bonds

If markets continue to be volatile after Standard & Poors downgrade of U.S. debt to Double-A+, pension funds will attempt to minimize their losses and buy bonds, says Brett Goldstein, president of The Pension Department in Plainview, N.Y.

By Melanie Waddell | Updated on August 17, 2011

If markets continue to be volatile after Standard & Poor’s downgrade of U.S. debt to Double-A+, pension funds will attempt to “minimize their losses and buy bonds,” says Brett Goldstein, president of The Pension Department in Plainview, N.Y.

On news of the S&P downgrade, there was a lot of speculation that public and private pension plans would be forced to sell their U.S. bonds because they were no longer Triple-A-rated, sparking a sell-off in the market, Goldstein says. However, this sell-off didn’t occur, Goldstein explains, because most pension funds have an investment policy statement (IPS) which allows for the new Double-A+ rating on U.S. bonds.

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