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Asia’s fund managers scramble for cash as sell-off hits returns
- Asia ex-Japan bond and equity funds hit by outflows
- Managers raise cash to meet demands for redemptions
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Fund managers are making a dash for cash as they brace for further volatility in markets and sell orders from investors.
Higher cash levels signal a more bearish outlook from fund managers as they bunker down to wait out the coronavirus pandemic that has infected more than 845,000 people worldwide and sent the global economy into a tailspin.
Cash is looking attractive relative to even government bonds, especially after two rounds of emergency rate cuts in the US that took the federal funds rate to almost zero. The return on cash at 0.1-0.2 per cent for a dollar parked at a bank might even be worth more than investing in one-month or three-month US Treasury bills, whose yield sank below zero last week.
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“For the fund industry, whether your fund has sufficient holdings in cash is the biggest pressure facing all fund managers right now,” said Freddy Wong, head of Asia-Pacific fixed income at Atlanta, Georgia-headquartered fund house Invesco.
Between March 18 and March 25, US$6.56 billion and US$2.41 billion flowed out of Asia ex-Japan bond funds and equity funds, the highest year-to-date weekly net outflows, according to funds tracker EPFR Global. From the start of the year up until March 25, Asia ex-Japan bond and equity funds saw net outflows of US$6.77 billion and US$9.32 billion respectively.
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Asia ex-Japan equity funds posted an average loss of 27.49 per cent, while Asia bond funds reported a smaller loss of 9.25 per cent for the year up to March 23, data from investment services firm Morningstar shows.
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