As the Fed fears shake markets, fund managers take shelter in cash

Molly wealth talk joined discussion · Feb 17, 2022 18:07

Fund managers increase cash holdings to highest level since early days of pandemic, as many are worried about global growth fears reducing and liquidity concerns becoming amplified.

Source: BofA Global Fund Manager Survey

Average cash holdings among investors jumped to 5.3 % this month, up from 5% in January, according to a closely watched survey by Bank of America of fund managers with a combined $1tn in assets.

Morever, UBS says wealthy investors are hanging on to cash.

61% of high-net-worth U.S. investors polled in January said they have more than 10% of their portfolio in cash and equivalents such as CDs. Of those, 56% said they are concerned about the impact of inflation on cash value, and 41% said they are waiting for the right opportunity to invest.

However, cash has provided almost no returns since Fed's coronavirus rate cuts.

Source: Crane Data

So why the fund managers and high-net-worth U.S. investors choose to hold more cash?

Because of the monetary risk and turbulence across global markets.

Source: BofA

Rising cash allocations, Edward Park, chief investment officer at Brooks Macdonald, said, "[do] not represent a conviction view that cash will deliver either nominal or [inflation adjusted] returns but a concern that equity and bond prices could both move lower together should we see another interest rate led sell-off."

Molly says,

I think the data and opinions may tell investors should be ready for risks.
Before the Fed meeting, what would we choose:
Buy some favourite stocks or hold cash?