Back on the sidelines: Wary portfolio managers opting for cash

While most portfolio managers remain optimistic about global economic recovery, more managers are keeping additional cash on the side as they re-evaluate the markets, according to a new survey of fund managers. A large majority — 72% — of the portfolio managers polled by Banc of America Securities-Merrill Lynch Research said they expect the global economy to strengthen over the next 12 months. But the same percentage of respondents also expect to see “below-trend growth and below-trend inflation” over the next year. As a result, managers are reassessing their positions, the survey found. The number of managers who have larger cash positions than normal increased to 10% in September, from 3% in August. Average cash balances rose to 4.1% of total assets, up from 3.7% in August, the survey found. Also, the number of managers who overweight equities dropped to 27% from 34%. The increase in cash and lower equity exposure illustrates that managers' risk appetites lags their confidence in the economy, said Gary Baker, head of European equity strategy at Banc of America Securities-Merrill Lynch Research. The survey, conducted online Sept. 4-10, included 234 fund managers representing $667 billion in assets who participated in a global survey and 189 managers representing $408 billion in assets who took part in regional surveys.