Yesterday's Wall Street Journal wrote, "Pensions, Mutual Funds Turn Back to Cash." It states, "U.S. public pension plans and mutual funds are sheltering more of their holdings in cash than they have in years, a sign of growing stress in financial markets. The ultra-defensive stance reflects investors' skittishness about global economic growth and uncertain prospects for further gains in assets. Pension funds have the added need to cut more checks as Americans retire in greater numbers, while mutual funds want cash to cover the risk that investors spooked by volatile markets will pull out more of their money. Large public retirement systems and open-end U.S. mutual funds have yanked nearly $200 billion from the market since mid-2014, according to a Wall Street Journal analysis of the most recent data available from Wilshire Trust Universe Comparison Service, Morningstar Inc. and the federal government. That leaves pension funds with the highest cash levels as a percentage of assets since 2004. For mutual funds, the percentage of assets held in cash was the highest for the end of any quarter since at least 2007.... Large public pension funds' average cash allocation jumped to 5.4% through Sept. 30, compared with 3.4% in mid-2014, according to Wilshire. The average cash level in mutual funds tracked by Morningstar, a fund-research firm, has risen for seven consecutive quarters to an estimated 8.75% at the end of September. One pension fund, the South Dakota Retirement System, increased its cash holdings to 20.8% of assets through June 30 of last year, from 12.8% in 2014 and 3.7% in 2013." The WSJ piece adds, "Some fund managers also attribute rising cash levels to fears that market volatility -- and changes to the market itself -- will make it more difficult to sell bonds to meet redemption requests. Banks have retrenched from the bond markets in the aftermath of the financial crisis, leaving fewer buyers when mutual funds need to turn their holdings into cash. A year ago, Western Asset Management Co. began mandating that its bond funds hold higher minimum levels of assets such as cash or short-term bonds that are easy to sell in case it needs to meet heavy redemptions."

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