As the Fed fears shake markets, fund managers take shelter in cash
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.
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.
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.
However, cash has provided almost no returns since Fed's coronavirus rate cuts.
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.
Because of the monetary risk and turbulence across global markets.
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."
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?
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