Whether you decide to use an offset fund when running the Asset Rebalancing process is entirely up to you. 

Pros:
  1. The resulting journal entries do not change the overall consolidated balances at the various GL accounts.  Thus you do not have to move money.
  2. The journal entry that ultimately records the transfer of assets is a single fund entry.  This makes various reconciliation processes easier since only one line is involved.
  3. If the amount you book via journal entry and the amount the bank moves are different, making a correcting entry is easy because only a single (or pair) journal line is involved.

Cons:
  1. The fund chosen for the offset fund will participate for an indeterminate time in each pool involved in the rebalancing.  Through strategic use of dates and manipulation of confirm dates, unwanted earnings can be minimized.
To expand further on the various points:

Pros-1: When you use an offset fund, the net results of the proposed transfer are "offset" by an entry in the offset fund.  In the situation where a large number of gifts were received into the checking account, a rebalance would most likely propose investing them in the pool.  When asset rebalancing is run the various funds would therefore show a debit to the pool and a credit to the checking account at the fund and summary level.  The offset fund entry would be the opposite - a debit to the checking account and a credit to the pool.  So overall the debits and credits to the checking account net to $0 as do those to the pool.

Depending upon the dollar amount of the balance in the offset fund, it is possible that no real money needs to move from the checking to or from the pool.  For instance, in a month where gifts totalled $100,000 and grant expenditures came to $98,000, the offset fund would show a $2000 balance in the checking account.  $2000 might not be large enough to cause a real transfer to occur.  Thus the $2000 balance would remain in the checking account until the balance becomes "deposit worthy" or goes negative.

Pros - 2  The asset rebalancing journal can be hundreds(or much more) of lines long and each line represents a movement of money from one investment to another for the various donor funds.  When reconciling FACTS or AP, if a particular rebalancing either does clear in the reconciliation period or is a deposit in transit, then it is necessary to show all the lines in the proper reconciliation period.  If it was a deposit in transit, all those entries would remain uncleared.  If you use the offset fund to transfer the money from one investment to another, if a deposit clears or is in transit requires the confirm or cleared date manipulation of one entry, not 100's.