Active Funds Plow into Cash, Have Best Year Since 2009

Actively managed mutual funds are having their best performance in more than a decade with about half beating their benchmarks in 2022, according to a new report. That compares to 34% of strategies besting their benchmarks, on average, over the past decade. But it has little to do with portfolio managers picking stellar stocks, according to data compiled by Goldman Sachs Group.

The main reason stock-pickers are seeing their best performance since 2009 has to do with the fact they’re sitting in cash, Bloomberg reports. In fact, cash allocations this year jumped from a three-decade low of 1.5% to 2.4%, according to the news service.

Without that buffer Goldman strategists found that, taking into account only stock selection, the average mutual fund portfolio has underperformed the Russell 1000, Bloomberg writes.

Parking more money in cash helped active managers avoid some of the market downturn and, at the same time, take advantage of higher yields in the wake of interest rate hikes, Bloomberg writes.

Many funds are looking for bargains among growth stocks that have seen valuations revamped in light of rising interest rates, according to the news service. Tech companies are a major draw: The average mutual fund boosted exposure to the seven largest tech stocks by 154 basis points in the second quarter, the highest increase since 2014, Bloomberg writes.

“Factor and sector rotations reveal a preference for growth among all mutual funds — not just those with a growth mandate,” Goldman strategists wrote, according to the news service.

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