Cash is creeping higher in the equity and multiasset portfolios of global money managers.
A number of money managers are holding up to 20% cash in some cases, in portfolios that usually would be holding far less or are fully invested.
“I have heard anecdotally from a number of managers that they are allocating some assets to cash where they have that flexibility,” said Phil Edwards, European director of strategic research at Mercer Ltd. in Bristol, England. “Those allocating a bit more to cash are doing so perhaps in preparation for a correction, or as they may be struggling to find opportunities that are reasonably priced in current market conditions.”
Some equity markets are off to a strong start. The U.K. FTSE 100 returned 4.35% through March 31, vs. -1.16% for the first quarter of 2014, while eurozone quantitative easing has pushed risk assets in the region up. The MSCI Europe index gained 16.76% through March 31, vs. 2.27% for the same period in 2014.
The U.S. is more muted, with the Russell 3000 up 1.8%, vs. 1.97% a year earlier.
The potential for a market correction and the return of volatility are high on the list of factors for moving assets into cash.
Allianz Global Investors officials late last year changed their thinking about the amount of cash managers can hold in portfolios, as a way of enhancing flexibility throughout its strategies.