Friends, If you see any information related to what is below, please let me know. Best, Sabri ++++++++++++++++++++ Mutual managers seek cash cushion By Elizabeth Wine and Andrew Hill in New York Published: September 25 2001 19:38 | Last Updated: September 25 2001 20:30 Some managers of US equity mutual funds have substantially increased their cash positions since the September 11 terrorist attacks, in case investors decide to redeem their holdings. Fund managers and industry analysts suggest funds have sold securities, although so far there is little evidence of large-scale redemptions. Falling stock prices have also eroded the value of the remaining equities in their portfolio, boosting the relative cash position. Equity mutual funds have been the backbone of the savings of US households, nearly half of which own mutual funds. A sharp increase in redemptions could be disastrous for markets, and is the fund industry's worst fear. Some managers were bearish even before the attacks, but report that the possibility of panic redemptions since September 11 has increased the need for a cash cushion. The average stock fund held 5.6 per cent cash in July, the most recent month for which data is available, according to the Investment Company Institute, the trade group for the mutual fund industry. That represented $201bn of the $3,589.9bn in assets held by stock funds at the end of July. The figure had already crept up this year, as managers grew increasingly concerned about the state of equity markets. A year ago managers held an average 5 per cent in cash. Hank Hermann, chief investment officer of Waddell & Reed, a Kansas City-based fund firm, said he had 13 per cent cash across mutual funds and private accounts. He estimatd the weighting of cash in his portfolio had increased by 2 to 3 per cent since the attacks, as markets had fallen and he had sold stock. "After the attacks, there were redemption issues we needed to keep in the back of our minds," said Mr Hermann, although he added that since Monday's rally, investors had not been redeeming. Robert Lee, an analyst at UBS Warburg, said a survey of mutual fund call centres indicated that the rate of outright fund redemptions had increased, but he added "I wouldn't characterise it as a stampede." Liz Ann Sonders, managing direcor of Campbell Cowperthwait an asset managing unit of US Trust, said she had anecdotal evidence that some of the medium to large US mutual fund companies were increasing cash positions and that some firms now held as much as 20 per cent of their portfolio in cash. Don Cassidy, analyst at fund tracker Lipper, noted that with the end of the quarter approaching, some managers might have begun gathering more cash to present a conservative picture to shareholders when the quarterly reports were sent out. He also suggests that in the four days after the attack with markets closed, managers had plenty of time to think about what stocks they wanted to sell. But, having sold, "they were probably in no particular hurry to get back in as markets were not going back up". The Dow Jones Industrial Average fell 14.3 per cent last week, its worst performance since 1933.
