Fund Managers Easing Out of Cash

Mutual fund managers are moving back into the stock market, finally putting cash they have been holding onto for more than a year back to work, MarketWatch reports.

Although some don’t think the economy is yet fully on its way to recovery, they sense that the worst is over and are compelled by cheap prices.

Data on the 50 best-performing equity funds from Morningstar shows that their median cash holding was 15.4% in 2008, and that they have lowered those levels to 9.1%.

“Stocks were down to the lower end of any rational historical valuation—unless you believed we were going into a depression,” said David Ellison, chief investment officer at FBR Funds, who himself moved 60% of his portfolios’ assets into cash last year. Today, cash comprises only 10% of their holdings.

Citing lower overnight inter-bank lending rates, an uptick in home sales, improving corporate earnings and restored capital markets, Ellison characterized all of that as “a pile-on of good news.”