Why Do Fund Managers Love Cash?

Many mutual fund managers have been jumping into an unlikely asset class lately: Cash. According to figures compiled by Bloomberg, the Yacktman Focused Fund is holding 19 percent cash, the IVA Worldwide Fund has 28 percent of its assets in cash, and the Weitz Value Fund is about 30 percent cash. The average U.S. stock fund has less than 5 percent of its assets in cash. 

Those funds aren’t exactly the biggest names in the business, but they’re all funds with at least a billion dollars in assets. They’re also all value funds, which means that they look for companies to be that they believe the market has underpriced. So these fund managers think the market is overpriced at current levels.

The same trend doesn't appear to be in vogue with growth fund managers. So growth funds – those who invest in companies they think have more capability to grow than the rest of the market – tend to be more invested in this market than value funds. That may be a hint as to where stocks are headed.