P&I Writes "Cash Is Back in Fold"
Pensions & Investments writes that "Cash Is Back in the Fold as Returns Rise." They tell us, "Cash is making its way back onto the list of attractive holdings for money managers and institutional investors as rates increase and returns improve. The latest Bank of America Merrill Lynch Global Research report, published December 18, showed the average cash balance increased to 4.8 percent, up 0.1 percentage point since the previous month." P&I quotes Kathleen Hughes of Goldman Sachs Asset Management in London, "We've definitely seen the trend of cash being more of an active decision rather than a passive decision in addition to people viewing it as an asset class again." The piece says, "She said there are multiple drivers for this interest, which depend on the currency and type of investor. For some clients, "very low or negative interest rates have galvanized them to take a more proactive approach to their cash as opposed to a passive sweep into an investment option that may not offer the best risk-adjusted return for them. On the other end of the spectrum, with rising rates in (U.S. dollar terms), we see some clients getting more proactive to take advantage of higher returns that are maybe available in money market funds and ultra-short duration products as compared to overnight bank deposits." The article adds, "Ms. Hughes said another factor is increased volatility in equities and the perception that the bull market in bonds is over. "We also see some (investors) moving into cash from other asset classes or shortening their fixed-income exposure by switching to short-duration or ultra-short-duration strategies," she said."
