Victoria-based value manager Tim McElvaine is in a hoarding state of mind. According to the Globe and Mail McElvaine’s fund is 25% in cash
at the moment clearly waiting for a good pitch to hit. While advisors aren’t likely to move their clients this far into cash, when it comes to asset allocation decisions at the moment, it’s clear the thought has crossed their minds.
Ottawa-based advisor Brent Vandermeer tends to take more of an institutional asset allocation strategy where his clients stay more fully invested based on their investment policy statement preferring to avoid big tactical decisions such as the one made by McElvaine.
When Vandermeer does ratchet up the cash component of a client’s asset allocation he tends to put the money to work in bonds and/or high-interest accounts keeping idle funds earning some amount of income rather than nothing at all.
Greg Hall, an advisor with RBC Dominion Securities in Toronto, prefers to keep his clients’ 10% in cash with 25-50% in liquid fixed-income investments, a portion of which he rebalances back into equities on any pullbacks in the markets. While it’s not something he anticipates in the near-term, he’s more than ready should it happen in the future.
As McElvaine states, “People will tell you they don’t want to hold cash because it doesn’t yield anything. But the real value of cash is its ability to buy things when prices become attractive.”
At the end of the day cash is a very difficult asset to let sit idle. Sometimes, however, it definitely makes sense. Now appears to be one of those times.