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Faced with spiking volatility in pretty much every market, it’s natural and reasonable to sell some risky assets and hide out in cash until the dust settles. So it’s not a surprise to hear that pension funds are doing just that.

Pensions, Mutual Funds Turn Back to Cash

(Wall Street Journal) – U.S. public pension funds and open-end mutual funds are keeping a greater share of their assets in cash as a result of both market jitters and demographic changes.

U.S. public pension plans and mutual funds are sheltering more of their holdings in cash than they have in years, a sign of growing stress in financial markets.

The ultradefensive stance reflects investors’ skittishness about global economic growth and uncertain prospects for further gains in assets. Pension funds have the added need to cut more checks as Americans retire in greater numbers, while mutual funds want cash to cover the risk that investors spooked by volatile markets will pull out more of their money.

Large public retirement systems and open-end U.S. mutual funds have yanked nearly $200 billion from the market since mid-2014, according to a Wall Street Journal analysis of the most recent data available from Wilshire Trust Universe Comparison Service, Morningstar Inc. and the federal government.

That leaves pension funds with the highest cash levels as a percentage of assets since 2004. For mutual funds, the percentage of assets held in cash was the highest for the end of any quarter since at least 2007.

The data run through Sept. 30, but many money managers say they remain very conservative. Pension consultants say some fund managers are considering socking even more of their assets into cash as they wait for the markets to calm down.

“Some clients are asking us, ‘Would we be crazy to put 10% or 15% of our assets into cash?’,” said Michael A. Moran, a pension strategist at Goldman Sachs Asset Management.