After parking investors' money in cash at record proportions, value fund managers have begun buying stocks again, according to The Wall Street Journal.
Value funds are a good bellwether for market watchers, because their performance has been strong in recent years, beating most other sectors. The trend may signal renewed faith in the market and an opportunity to pick up stocks on the cheap.
Investors have been pouring money into these funds, with large-cap value funds gaining $18.5 billion in new money last year, according to data from Boston-based Financial Research Corp.
"Things all turned around to a large degree in May and June," said Curtis Jensen, referring to the market correction. Jensen manages The Third Avenue Small-Cap Value Fund.
And he and others are putting their inflows to work.
Jensen's fund, for example, which had cash holdings of 40% a year ago, has bought $100 million in stock and other products, brining that cash allocation down to 28.8%.
The Perritt Emerging Opportunities Fund added 38 stocks to its portfolio between November and April, and two exchange-traded funds focused on indexes of very small companies. Since the start of the year, the fund had shifted from 30% cash to 10%. "We couldn't find a more attractive valuation in some of the companies we looked at last year, so we let cash build up as money came in," Michael Corbett, a manager of the fund, told The Wall Street Journal.
Value funds have fared well in a turbulent market, with those that invest in large companies up 15% this year, compared to large-cap growth funds, which are down 6%.
But not all managers are spending down fund cash yet.
FPA Capital Fund has 43% in cash currently, and is set to hit half by year-end, according to Robert Rodriguez, the fund's manager, and chief executive of First Pacific Advisors.
"I believe my contemporaries are taking on greater risk," he said.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.