Fastest Mutual Fund Cash Depletion Since 1991

“It’s not a red light, but it’s a flashing yellow light that the strongest part of the rally is probably over. There’s not as much buying power out there.”

-Jerome Dodson, president of Parnassus Investments


This is a datapoint worth keeping an eye on:

“Equity mutual funds are burning through cash at the fastest rate in 18 years, leaving them with the smallest reserves since 2007 in a sign that gains for the Standard & Poor’s 500 Index may slow.

Cash dropped to 3.6 percent of assets from 5.7 percent in January 2009, leaving managers with $172 billion in the quickest decrease since 1991, Investment Company Institute data show. The last time stock managers held such a small proportion was September 2007, a month before the S&P 500 began a 57 percent drop, according to data compiled by Bloomberg.”

I have no idea what the velocity of this drop means — the speed at which mutual fund cash drops is not something we’ve researched previously.

Any thoughts?


S&P Rally Slowed by Fastest Cash Depletion Since 1991
Lynn Thomasson
Bloomberg, March 8 2010

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