Fund managers sitting on record levels of cash

Cash levels have gone up to 5.8%, the highest in 15 years, as investors are worried about the risks in the market


When the cash hoard is put to use, it could very likely flow into the bond market. Photo: Bloomberg
When the cash hoard is put to use, it could very likely flow into the bond market. Photo: Bloomberg

The Bank of America Merrill Lynch survey of global fund managers for October finds that cash levels have gone up to 5.8%, the highest in 15 years, as investors are worried about the risks in the market.

The high cash level should normally be a “buy” signal as the survey is seen as a contrarian indicator.

But then, a net 11% of fund managers were overweight global equities in October, a seven-month high, versus a net 1% overweight in September.

Allocations to emerging markets went up to a net 31% overweight, versus a net 24% overweight in September and a net 13% overweight in August.

On the other hand, a net 50% were underweight global bonds this month, versus a net 45% underweight in September.

When the cash hoard is put to use, it could very likely flow into the bond market.

India a bright spot for
auto makers

Investors are optimistic on global auto sales prospects for the next two-three years. Nomura forecasts that growth will be led by emerging markets where sales are likely to expand by 4.7% this year.

Sales had contracted by 1.6% in calendar year (CY) 2015, Thereafter, the pace could touch 7% by 2018.

Also, there is consensus among investors that sales growth in India is expected to hit double digits over the next three years, from low single-digit growth in the last two years.

Led by two-wheelers and passenger cars, growth will accelerate although heavy commercial vehicle sales may slacken.

The report highlights that most ex-Japan investors fear a decline in profits of North American auto firms in the next couple of years, as growth has peaked in the region.

However, Nomura analysts reckon that higher incentives and lower sales in the US may be offset by an improved product mix.

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