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Fund Spy

A Large Cash Stake Doesn't Necessarily Make for a Low-Risk Fund

Managers who stockpile cash often take risks in other areas.

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A big cash stake can offer a false sense of security.

One of the potential benefits of an actively managed fund that often keeps a big portion of its portfolio in cash is lower volatility in times of market stress. Of course, investors in these funds typically sacrifice some of the upside in rising markets because they're not fully invested.

Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.