Fund managers flee to cash as coronavirus ‘second wave’ sends investors into panic

Linda J. Dodson

Professional investors have rushed to cash amid the coronavirus market crash with levels in fund manager portfolios the highest they have been since the aftermath of the September 11 terror attacks in 2001.

Many fear the impact of coronavirus on markets is far from over, according to a new survey. The average manager now has 6pc of their portfolio in cash, up from 5pc in March.

The survey authors, Bank of America Merrill Lynch, said the new cash position was significantly higher than the average of 4.6pc over the past decade. This would traditionally be a sign of investors being too fearful of markets, making it a good time to buy back back into stocks.

The principle concern among fund managers is a second-wave of the disease coming back after restrictions on movement are lifted, causing a repeat market fall and prolonged global recession.

Professional investors have hit “peak pessimism”, the bank said, with nine in 10 of the respondents anticipating a global recession – when GDP falls in two consecutive quarters – this year.

More than half expected the upcoming recession and subsequent recovery to be a slow one. Less than a quarter were optimistic of a immediate economic bounce once restrictions are lifted.

On average,  fund managers’ allocation to stock markets was the lowest it has been since 2008. As well as cash, there has also been a rise in the amount held in bonds. The most popular trade in the past month has been to buy American Government bonds, known as treasuries, the report said.

Britain remains out of favour and was among the most-sold markets in the past month with managers also withdrawing money from European and the emerging stock markets.


American and Japanese stocks were the only two to see an increase in buying. However, both countries use currencies (the dollar and yen, respectively) that are viewed as a “safe havens” therefore investing in these countries can another sign investors are risk averse.

Despite the pessimism from professionals, DIY investors are seemingly more upbeat: many have been buying stocks rather than selling in the past few weeks. 

Data from fund shops Interactive Investor and AJ Bell showed that more than two-thirds of all trades have been to buy stocks in the past two weeks. Cash levels are generally below those of professionals, but have risen. However, this could be due to the end of the tax year on April 5, with investors adding cash and waiting to invest.

Source Article

Next Post

To pay, or not to pay? The coronavirus childcare conundrum

Money & Daddy is a new weekly column about parental finances, published on Wednesday mornings. Got a topic or problem you want me to tackle? Email me: [email protected] Days in official lockdown: 23 Days in unofficial lockdown: 30 It is now more than a month since the wife, the boy […]

You May Like