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The equity funds stashing the cash

An assessment of those funds reporting higher cash allocations
The equity funds stashing the cash
  • With market uncertainty returning a number of equity funds are holding decent levels of cash
  • We look at the reasons for doing this and some of the funds with higher cash levels

Times look uncertain and fund managers are hoarding the cash. That’s one big takeaway from October’s instalment of the widely followed Bank of America Global Fund Manager Survey: respondents’ cash levels have jumped to a 12-month high, reflecting a growing sense of pessimism about the outlook for future returns.

While holding some cash can be useful for private investors, high allocations to it in funds can result in complications as it skews their asset allocation and creates a potential drag on returns. But in times of high valuations and material uncertainty, fund managers with cash can 'buy the dip' if markets suddenly tank. Holding cash is also prudent for open-ended funds which invest in less liquid assets, as highlighted by the Woodford scandal.

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