Earlier this month, Robert Loest had what is every fund manager's best friend: ready money. There was just one problem: He didn't have anywhere to put it.

The portfolio manager of the IPS

(IPSMX)

Millennium and

(IPSFX)

New Frontier funds had recently sold shares of Internet portal

Yahoo!

(YHOO)

,

Verio

(VRIO)

and

AskJeeves.com

(ASKJ)

. But with the market slipping from one low to another, he sat on the cash, waiting.

At one point, the cash level in the $19 million mid-cap New Frontier reached 28%. Millennium was at about 15%. He finally decided to put a portion of the money into a few large, liquid names.

Loest says that in the recent market turmoil he wasn't alone in holding cash. "Buyers just disappeared,'' Loest says.

With jittery market players scanning hither and yon for any traces of bear tracks, Loest's predicament speaks volumes. So far, the overall trend doesn't indicate a large-scale push to remove money from the table.

Morningstar

estimates that the latest numbers, from Thursday, show a 5.05% cash stake for the average domestic stock fund, compared with 5.12% at year-end (The latest numbers reflect varying reporting dates from the funds).

But while fund managers say their cash holdings don't yet suggest bearishness, they do suggest trepidation.

"People may not actively be raising cash, but they're slower to put new money to work," says James Grefenstette, portfolio manager with several funds from

Federated Investors

of Pittsburgh. Flows into funds continue to be healthy despite the volatility.

In his own funds, Grefenstette says he's slower than usual to put the money back into the market, because he is unsure where it will end up. As a result, the uninvested portion of some of the portfolios has risen to 5%. In the past, he's kept those positions closer to the 2% range. "What's the rush? That's what we're saying," he adds.

Other fund complexes have similar experiences. White-hot

Janus

disclosed recently that some of its most popular funds were sitting on a mountain of cash, with the

(JAGLX) - Get Report

Global Life Sciences reaching up to nearly 30%, primarily a result of a deluge of new investments. Last week, it closed the Global Life Sciences and the two other funds, due mainly to huge inflows. Cash in all three ranged from 14% to 30%.

Firsthand Funds

of San Jose, Calif., whose offerings invest in subsectors of technology, shows a double-digit cash balance in the company's

(TEFQX) - Get Report

E-Commerce offering as of its March 31 disclosure on its Web site. Firsthand didn't return calls seeking comment.

The same goes for portfolio manager Tino Selitto, skipper of two

Berger

funds and co-manager on two others. "In our case, we're not selling positions; we're just not actively looking to buy," he says. His funds' cash stakes range between 1% and 5%. Usually he tries to run closer to 0%.

In this unprecedented bull market, it has been extremely difficult to break the cycle of very low cash levels. Indeed, many funds have been punished by outflows for not taking full advantage of the huge returns offered by stocks in recent years. In fact, the standard mantra of many fund complexes has been, "We prefer to be fully invested in the stock market."

Portfolio managers are generally skittish to talk about their cash positions because it is an indicator that shareholders and their advisers watch closely. Moving in and out of cash is seen as a proxy for a manager's sentiments toward the market. A large stash indicates a bearish stance. But for managers, timing when to fatten up your cash holdings is perilous business. Just ask Foster Friess of the

(BRWIX) - Get Report

Brandywine fund.

In 1998, Friess moved significantly into the ultra-safe stuff in the midst of the Russian debt debacle and ended up sitting out the

Nasdaq

surge in the fourth quarter. He underperformed most of his mid-cap growth peers that year.

But he stayed fully invested in 1999. Lately, Friess' fund has held up better than others in his category despite a significant weighting in technology. Could Friess be doing a repeat of 1998? It's possible, given that he's up 7.5% year to date, when his peers are averaging a negative 1.7% return. Where are his cash levels? Friess says only that the fund's cash stake is "normal."

Not all managers are as likely to take such big bets. The risks are too great with a populace that seems more obsessed with the value of the fund shares than who's going to be the next president.

"If you had moved to cash last summer, you would have missed out at the beginning of the fall, when the market ran up over 50%," Selitto says. "I'd hate to have been sitting on the sidelines and seeing that."