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Warning Sounds As Mutual-Fund Cash Levels Hit All-Time Low
My Morningstar Instant Xray monthly analysis indicates that cash levels have been increasing , within funds held inside my portfolio, since the first part of 2015. I can not speak to the whole universe of all mutual funds as a whole. However, some of my hybrid funds have reduced their bond allocation while raising their allocation to some combination of both stocks and cash while the other asset category has remained about the same. In addition, short positions have increased from about six percent to about eight percent.
Geez - I'm surprised. I wonder if they're excluding short and ultrashort-term paper in their results? My conservative allocation funds (mostly at Price) have held hardly any cash for a long time. But they hold a lot of short term obligations - perhaps a year or less in duration. I tend to think of that as cash for all practical purposes. By going out a little in maturity and buying in large lots they're able to get perhaps 1% or more on money that would otherwise be earning near 0.
As I noted recently OAKBX appears to have divested itself of almost all long term debt in favor of this short duration type paper. Overall allocation to fixed income has remained about the same.
Index funds generally own very little cash. Since indexing has been growing, it is not surprising that cash levels overall would be lower. A more relevant statistic would be the cash level of only actively managed funds.
Comments
As I noted recently OAKBX appears to have divested itself of almost all long term debt in favor of this short duration type paper. Overall allocation to fixed income has remained about the same.