The Dow Jones Industrial Average fell 635 points, at the end of the first trading day U.S. debt stood at AA+. For institutional investors, that means a flock to treasuries.

“If we have a more days like yesterday (August 8), pensions will start buying treasuries simply because there is no alternative,” said Brett Goldstein, a New York-based pension administrator and President of The Pension Department. “Pensions will become even more underfunded…they’ll be putting their money back into AA bonds where there stand no chance for becoming more deeply underfunded.”

Market volatility in the first six trading days of August has dealt a severe blow to pension plans sponsored by S&P 1500 companies, with the aggregate funded status decreasing by $191 billion to a funding deficit of $496 billion and an aggregate funded ratio of 73 percent as of the market close on August 8, according to data compiled by institutional consultancy Mercer.

Some pension plans are able to move further down in the credit scale, which gives investment committees the ability to purchase and hold riskier bonds. The mandates of large pensions such as California Public Employees Retirement System (CalPERS) and New York State Retirement System allot for holdings of Triple B rated bonds, according to Goldstein.

“They have some liquidity requirements but they’re not selling off,” Goldstein said.

The Employment Retirement Income Security Act of 1974 (ERISA) does not explicitly require an Investment Policy Statement. ERISA also does not require public and private pension plans hold U.S. Bonds or Triple A rated bonds.

In regards to a plan’s flexibility of credit worthiness in its bond holdings, size matters. The larger the fund, the large the fund is able to go down in the credit scale. Smaller plans have less ready cash, and they don’t want to take the risk inherited with lower grade bonds, Goldstein noted.

“It’s all about risk management right now,” he said.

most pension funds have an Investment Policy Statement which allows for the new AA+ rating on U.S. Bonds, noted Goldstein in a statement. Such a policy is good news for U.S. treasuries, fueling their increasing popularity.