Neptune head of client investment strategies Douglas McDowell says managers should not be afraid of using cash during market volatility.
Speaking at the Cofunds investment forum in Hertfordshire last week, McDowell said money managers in the balanced managed sector do not use cash as a strategy during market volatility.
He said: “The out-of-market risk in most managers’ minds is too great. They are concerned that if they have a lot of cash the market might go up.
“They think they are not doing their jobs as stockpickers if they hold a lot of cash. In turbulent times, if you get it right and have lots of cash, you will hang on to your capital. The success of long-term investing is based on two things, it is riding on the waves when it goes up and hanging on when the market goes down. You can only do that if you have cash.”
The £811.6m Neptune balanced fund, managed by founder Robin Geffen and Ted Alexander, had 22.9 per cent in cash at the end of October up from 17.4 per cent at the end of July.
Skerritt Consultants head of investments Andy Merricks says: “Holding cash is an acceptable strategy as long as it is a short-term play. Our discretionary portfolios are running 30 to 34 per cent cash. People who invest money in these portfolios and balanced portfolios trust their capital will be preserved.”