Investors still favor cash, BlackRock's Kapito says

Most still largely on the sidelines five years after the financial crisis

Nov 1, 2013 @ 3:15 pm

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BlackRock Inc. President Robert Kapito said investors are still largely in cash five years after the financial crisis.

“Cash is something that, as you know, with inflation is going to hurt you in the long term,” Mr. Kapito said Friday. “People are not getting it and they're not putting enough money away.”

A survey commissioned by BlackRock showed U.S. investors hold more than 60% of their savings in cash or cash-like investments including money market funds and certificates of deposit. Respondents held just 18% in stocks. The survey, conducted by Cicero Group, polled 4,000 people in the U.S., most of whom had an annual income below $45,000, from Aug. 24 to Sept. 16.

Mr. Kapito and chief executive Laurence D. Fink, co-founders of BlackRock, have urged investors for more than a year to get out of cash and into stocks. But with U.S. stocks trading near record highs, some investors are becoming more cautious. Mr. Fink this week said he's seeing “bubble-like markets” again, and top fund managers from Wally Weitz to Donald Yacktman and David Einhorn have said they're holding more cash.

'BUBBLE-LIKE MARKETS'

Mr. Fink on Oct. 29 said the Federal Reserve should begin pulling back on its stimulus program of buying bonds because it was contributing to “bubble-like markets.” Mr. Fink, who last year said he would invest 100% of his personal wealth in equities, signaled more caution after the recent debt debate in Washington shut down the government for more than two weeks and brought the country close to its legal borrowing limit.

Mr. Weitz, manager of the $1.1 Weitz Value Fund, held 29 percent of assets in cash and Treasury bills as of Sept 30. Mr. Yacktman has pushed the level of cash in his $11.4 billion Yacktman Focused Fund to 21 percent as of Sept. 30, from 1.4 percent at the end of 2008.

Hedge fund manager Mr. Einhorn signaled in a conference call Thursday that he is taking a more conservative approach. Long positions, which gain on rising asset prices, exceeded short bets by 35 percentage points as of Sept. 30 at Greenlight Capital Re Ltd., the reinsurer where Mr. Einhorn oversees investments and serves as chairman. That's down from about 42 percentage points three months earlier.

Mutual fund investors this year have heeded the advice to buy equities. Year-to-date as of Oct. 23, stock funds in the U.S. attracted about $127 billion, while bond funds lost about $34 billion to withdrawals, according to data compiled by the Investment Company Institute.

(Bloomberg News)

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