Fund Managers Wonder How Much Cash To Hold

by: John Bethel

In the For-What-It's-Worth department, I've currently got enough cash to buy a couple more full portfolio positions.

Is that a lot?

Well, maybe. Maybe not.

Longleaf Partners just released its latest quarterly report, and Mason Hawkins and Staley Cates report being nearly fully invested. They have been for at least the past few months.

Meryl Witmer Meryl Witmer (pictured) stated at the recent Barron's conference that her firm, Eagle Capital Partners, was holding roughly 50% cash. She said that's about the most they ever carry. And whenever they hold that much something happens in the next 6 to 12 months in the market that creates opportunities.

And the amount of cash being carried by investors fluctuates, as you can see from this Bloomberg report:

Charles de Vaulx, who manages $11 billion at the First Eagle Overseas Fund in New York, has increased his proportion of cash to 25 percent from 18 percent since midyear because he can't find anything to buy.

"We haven't been able to identify enough cheap securities to replace the ones we've lost to takeovers and those we decided to sell,'' de Vaulx said.

Value investors such as de Vaulx are avoiding equities because stock prices have met their targets. Other investors are adding to cash holdings, exceeding their benchmarks, because they doubt the 13 percent increase in the Standard & Poor's 500 Index since mid-June will last.

This further down the piece:

The $9 billion Third Avenue Value Fund and the $3.5 billion Fairholme Fund also recently held 20 percent to 30 percent of their assets in cash, said Herbert of Morningstar. The managers weren't available for comment.