U.S. funds raise cash allocations, cut stocks as risks rise: Reuters poll

Fri Jan 30, 2015 8:19am EST
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By Ashrith Doddi

(Reuters) - U.S. fund managers recommended increasing cash allocations to their highest in at least seven years in January as low global inflation and surprise easing by major central banks prompted defensive rearrangements to model portfolios.

Recommended cash allocations in a model global portfolio based on a panel of 11 fund management companies polled by Reuters over the past few weeks doubled to 10.1 percent from 5.1 percent last month, the highest since at least May 2007.

Recommended global equity holdings were cut to 50.4 percent, although U.S. holdings within the portfolio rose.

Last year's dramatic drop in oil prices has extended into this year, pushing Brent crude oil to less than $50 a barrel and keeping alive disinflationary pressures around the globe.

While inflation in the euro zone has turned negative, price rises have slowed sharply in Britain too, and to a lesser extent in the United States, to below their respective central banks' targets.

"It is not a bad move to raise cash. We have been raising cash in some of our portfolios just to take profits that we had. It continues to make sense we look for a better entry points (into stocks)," said Wayne Lin, fund manager at Legg Mason.

It has been a muted start to the year for U.S. stock markets: the S&P 500 index .SPX has shed around 3 percent.

Within the global equity portfolio, fund managers raised their recommended allocations into U.S. stocks by almost 10 percentage points from last month to 70.8 percent, reflecting continued optimism about the world's largest economy.   Continued...

American dollar notes are displayed in this photo illustration in Johannesburg August 13, 2014.  REUTERS/Siphiwe Sibeko