Money Managers Liking Cash Right Now... Do You?

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FIREd

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So last night I was running Morningstar X-ray on my IRA (end of the quarter check up) and I found out that my asset allocation was out of whack. As it turns out I am holding close to 20% in cash right now (instead of th 5% I usually keep on hand for buying opportunities) because many of my funds' managers are holding huge chunks of cash at the moment. So with 15% of my IRA invested in bonds, my asset allocation is now 65% stock / 35% bonds and cash instead of the 80%/20% I usually like. What's going on? Is the stock and bond markets' outlook so bad that the wall street pros feel compelled to pile up on cash? And for those "dirty market timers", what is your outlook on the market? Do you feel like cash is king right now?
 
Right now I'm not in the accumulation stage of my financial life - more preservation...so cash (CDs, MMF, Muni & Income CEFs) is about 80% right now - although I do take short term positions in equities and then back to cash when an opportunity presents itself...
 
100% stocks

I am always 100% stocks. I am just not in the same playing field as the fund managers, so I don't compare with them. Thier universe contains hundreds of stocks while mine contains thousands. I try to invest in stocks with market capital of less than 100 million and prefer the ones with less than 10 millions.
 
You must be using actively managed funds with alot of overlap if you have that much unsuspected cash. Our asset allocation is right where we want it to be. With our ETFs and passive index funds, there is little room for cash in those.

It is true that the bond funds in our 401k have a significant fraction of cash. I consider cash to be part of my fixed income, so it doesn't bother me.
 
Most of my index funds are in my taxable accounts. I use the IRA for managed funds and bond funds. The largest holding in my IRA is Fairholme, right now 20% in cash. I also own Pimco All Asset, right now 55% cash. Even my global bond fund is 50+% invested in cash. Finally the Vanguard Asset allocation fund (which I do not hold) is 20% cash / 80% stocks right now (it was 100% stocks a few weeks ago).
 
Cash as a % of an actively managed fund can be due to a lack of things to buy, but it can also be the result of the manager getting flooded with cash after a hot streak and taking their time about putting it to work.

I would also not read too much into the cash position of your PIMCO fund. IIRC, PIMCO likes to play games where they use unlevered, cash collateralized derivatives to replicate positions rather than own the asset outright.
 
Money Managers Liking Cash Right Now... Do You?

wull yeah. Duh. I like gold coins, silver, stacks of 100s paperclipped together, numbers on the ELoan and FNBO and PenFed websites. I figure it only costs me the inflation rate (read: funding the Iraqi Freedom/Democracy campaign). Pretty cheap given my stunning ability to buy high and sell on the stock market. Might not be the best for those who do well in the market.
 
I'm in a hold strategy right now. In fact, I don't think I have purchased any new equities in over a year.

I have been saving extra money in money market accounts for a while. Even so, my equity/cash allocation has kept constant since my equities have performed really well over the past year or two.
 
If you hire fund managers by buying actively managed funds, then you need to let those fund managers do their job for you, including deciding how much to hold in cash.

In particular the bond funds - holding cash is reasonable if they feel that cash is better "value" under current circumstances.

Audrey
 
retire@40 said:
I'm in a hold strategy right now. In fact, I don't think I have purchased any new equities in over a year.

I have been saving extra money in money market accounts for a while. Even so, my equity/cash allocation has kept constant since my equities have performed really well over the past year or two.
Click to expand...

I've been the same. Equities keep growing - to keep AA at target, cash I save from w*rking has been going to fixed income accounts.
 
brewer12345 said:
Cash as a % of an actively managed fund can be due to a lack of things to buy, but it can also be the result of the manager getting flooded with cash after a hot streak and taking their time about putting it to work.

I would also not read too much into the cash position of your PIMCO fund. IIRC, PIMCO likes to play games where they use unlevered, cash collateralized derivatives to replicate positions rather than own the asset outright.
Click to expand...

Spot on...........looking at Treasury yields, some managers are parking some money in short-term, while waiting for a pullback in the market to buy things on sale........almost like they feel one is imminent.......
 
Just spot checked - Vanguard Asset Allowcation fund is holding 20% cash versus 100% stock when I looked ? months back.

They use some kind of quant model to allowcate between stocks, bonds and cash aka short term reserves.

Sooo - what's up doc?

Love my Target Retirement - let those Vanguard computer programs do my heavy lifting.

Meanwhile - the putz factor says I need to keep dinking around to find the next great Dell, Harley Davidson or other stock that's going get me that villa in the Bahamas.

heh heh heh :cool:.
 
Cash is almost 40%, contemplating shifting more into short-term or intermediate treasury bond funds or possibly Vanguard REIT index.
 
Interesting. I just read somewhere that mutual fund cash levels are near historic record lows, which is usually given as evidence of a major bull top. OP claims the opposite.

Another problem of using mutual funds: their cash levels. Of course, if you want actively managed, that is fine, out of the 7000 or whatever funds. On the other hand, there are many options where you can be sure that your investment will remain entirely, or at least mostly, in stocks or whatever, come Hell or high water...

Of course, none of that applies if you invest in a fund where you expect manager to vary the mix....I guess that is what those "blend" funds are. Not my cup of Hemlock, though.
 
unclemick said:
Just spot checked - Vanguard Asset Allowcation fund is holding 20% cash versus 100% stock when I looked ? months back.
Click to expand...


Wow, that must be really recent because I checked their AA just about a month ago and it was still pegged at 100% equities. I was a bit surprised then that they hadnt lightened the load a bit.
 
Swear to god, I looked at it in the month of june...maybe late may...and it was at 100% equities. Its one of the handful of things I look at from time to time to see which way the wind is blowing.
 
I agree with the bunny,

I checked the AA of the VG Asset Allocation Fund just a few weeks ago and on the Vanguard website at least it was listed as 100% invested in equities.
 
FIREdreamer said:
I agree with the bunny,

I checked the AA of the VG Asset Allocation Fund just a few weeks ago and on the Vanguard website at least it was listed as 100% invested in equities.
Click to expand...

Well, a 10% correction won't bode well for that AA................O0
 
I'm wondering what flipping 10-20% between equities and cash is going to do to the tax efficiency.

At least I dont own the sucker...anymore...
 
FIREdreamer said:
I agree with the bunny,

I checked the AA of the VG Asset Allocation Fund just a few weeks ago and on the Vanguard website at least it was listed as 100% invested in equities.
Click to expand...

Good to know.

Maybe it bounces around a bit? Prior to April every time I checked it was 100% equities, then I noticed 10% cash and later 20% cash. Now that I think about it, it seems unusual that AA allocation apparently moves in blocks of 10%, instead of 6% or 17% cash...

I think I'll read much less in to AA's future neat and precise 10% shifts :)
 
I am not sure how much cash I am holding at this point... due to money managers being in cash. I even noticed on one of my index funds that a substantial amount is in cash.

DW has PTTRX (bond fund)... the manager is almost all cash. That thing represents about 12% of our assets. Add the 3% we are holding in cash... we are at least holdin 15%. I suspect if I looked at all funds combined, it is probably close to about 20%.


It is an interesting thought though. Funds usually keep x% in cash equivalents for liquidity. I have a 60/30/10 target @ ER. The 30/10 is controlled by me allocating. IF the funds have another 5% in some sort of short-term instrument... I actually have a 55/30/15 allocation. It is not enough to try to make any adjustments to compensate... but it does explain for some slight variation in funds compared to the benchmark.
 
Mutual fund managers have cash for several reasons:

1)A huge influx of cash that they need time to figure out how to invest.

2)Keeping some available for opportunities that could come along soon.

3)If redemptions start running higher than normal, they would rather pay cash than sell their positions to meet them

4)To protect the fund's shareowners in volatile markets.

I remember AGTHX was 30% in cash in 2000 and 2001. I don't think their shareholders got too pissed when they were buying short-term Treasuries instead of ORCL................O0
 
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