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Cash as a Percentage of Mutual Fund Portfolios

Cash as a Percentage of Mutual Fund Portfolios (Since 2000)
Source: Investment Company Institute
Related Metrics
  • Assets in Money Market Funds
  • Mutual Fund Inflows/Outflows

    ** Back to Metrics **

    For the second month in a row, cash sitting in mutual fund portfolios fell, according to figures released Tuesday afternoon from the Investment Company Institute. Cash as a percentage of mutual fund holdings fell to 5.6% in January, down from the December figure of 5.8%. Just three months ago, cash as a percentage of mutual fund portfolios reached a three-year high of 6.5%.

    With a strong stock market in January, it's no surprise that cash levels came down a bit during the month. There's little doubt that some of the cash deployed by mutual funds helped boost stock prices during January. February's difficult stock-market environment, however, may temper fund managers' enthusiam for deploying large amounts of cash into equities. Indeed, fund managers might be content to let their cash earn 5% in money market accounts instead.

    Why This Metric Matters
    This figure shows the percentage of assets under management that equity mutual fund managers have in cash or cash equivalents like money market funds. When this number rises, it indicates that money managers are growing cautious. That's typically bad news short term -- as money managers are reluctant to spend that cash on equities.

    But it's often seen as a positive for the market looking out a little further, as managers can be expected eventually to use that cash to load up on stocks. So, short term, rising cash levels can be seen as a negative. Longer term, it's a potential positive.

    Consider this: In October 1990, cash levels reached nearly 13%. The market rallied sharply right after that: The S&P 500 bottomed that month but was trading almost 30% higher within a year. In March 2000, cash levels reached their lowest levels of the decade, just as the Nasdaq and S&P 500 reached their all-time highs. Since then, the indices have fallen and cash levels in mutual funds have begun to rise.
    How Often Updated on TSC
    Monthly, near the end of the month for the prior month
    Historical Info
    The Investment Company Institute has been tracking this particular metric since 1970. During the '90s bull market, this metric recorded a high of 12.9% in October 1990. Its lowest point from the 1990s forward came in March 2000, when it sank to 4.1%. (See this related story for more historical info.)
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