Mixed-asset funds are within their remit to make strategic decisions about how much cash to hold. But some stock market funds have also been building up high cash positions.
The Gresham House UK Multi Cap Income fund had around 14pc of its assets in cash. Ken Wotton, the co-manager, said this was because the fund was preparing to take advantage of a fall in the London stock market.
“Concerns over inflation, supply chain disruption and the new Covid variant have driven volatility,” he said.
Mr Wotton added that the cash would be used to buy stocks with robust, long-term qualities overlooked by the market – at low prices. The fund’s has also had an inflow of cash from new investors, he said.
The Sanford DeLand Free Spirit fund, which also invests in British stocks, held 18pc in cash at the end of October, although the figure fell to 12pc this week. Eric Burns of Sanford DeLand said the fund had begun to accumulate investors’ cash in the summer.
“We stood back in July and August and let the cash build. In recent weeks a number of shares have become attractive and we have used dips to top up existing holdings,” he said. “As a result, the cash position has reduced from a peak of around 18pc to 12pc at the end of November.”
Rob Burgeman of wealth manager Brewin Dolphin warned DIY investors not to take their cue from fund managers by taking profits and waiting for a dip.
“For regular investors to sell stocks and move into cash, they need to think that the news is going to get much worse than it is now. We do not think that will be the case,” he said. “Markets have been choppy this week. Some of the sharpest fallers were travel companies, yet shares in easyJet rose by 5pc between Monday and Thursday. We do not think we will have a big disaster again.”
Laith Khalaf of broker AJ Bell said DIY investors should consider selling bonds if they expected a crash when interest rates rose.
“But as omicron has demonstrated, safe havens such as bonds can still shine if fears over global growth appear,” he said. “Investors may want to consider selling long-dated government bonds and buying ‘strategic bond’ and corporate bond funds, which would be less badly affected by rate rises.”
Mr Khalaf named the Artemis Strategic Bond and Fidelity Strategic Bond funds, which have returned 22pc and 19pc respectively in five years.
