personal-finance
What the cash position of equity MFs tells you
Jan 20, 11:01

Equity mutual funds typically hold cash to honour redemptions. However, when the valuations appear stretched, fund managers may find it difficult to deploy cash effectively. Sometimes, a scheme may have got large inflows and the fund manager may be buying stocks gradually. Also, in the case of new fund offers, the managers may take some time to invest. All these result in cash holding of equity schemes increasing as a percentage of assets under management.

There can be excess cash in the portfolio if the fund manager expects increased volatility in the near term. A high cash level in the portfolio can lead to underperformance, if stocks run- up fast.

Cash Holding