Buffett Increases Cash Reserves, While Fund Managers Hit 15-Year Low in Cash Holdings

Warren Buffett’s cash accumulation contrasts with the global trend of shrinking cash reserves among fund managers / Reuters 

Amid rising global uncertainties, Warren Buffett’s Berkshire Hathaway continues to build up cash reserves, even as global fund managers find themselves holding the lowest cash levels in over a decade. According to a recent survey by Bank of America, as of February 2025, global fund managers’ cash holdings have dropped to 3.5%, marking the lowest point since 2010. This sharp decline in cash holdings has been interpreted by analysts as a potential "sell signal."

Bank of America further elaborated that a cash reserve below 4% indicates a sell signal, while a rise to 5% would typically signal a buying opportunity. The survey, conducted with 205 asset managers overseeing a total of $4.82 trillion in assets, revealed that 34% of participants believe global stocks will deliver the highest returns this year. Meanwhile, only 11% are reducing their bond holdings, signaling a general shift toward equities.

The current bullish sentiment is largely attributed to expectations of a U.S. rate cut and continued strong economic growth. However, a significant 89% of survey respondents expressed concerns that U.S. stocks are currently overvalued—this sentiment is the highest since April 2001.

Alongside these findings, Bank of America reported a slight increase in investor sentiment, as indicated by the rise in its investor sentiment gauge from 6.1 in January to 6.4 in February. As part of their portfolio adjustments, fund managers have increased allocations to stocks in the Eurozone, bonds, and defensive sectors, while reducing positions in technology stocks and banking sectors.

In terms of macroeconomic expectations, there has been a subtle rise in the probability of a soft landing for the global economy, with expectations now standing at 52%. On the other hand, the chance of a hard landing remains minimal at just 6%. The biggest risks to risk assets are identified as the global trade war and disorderly increases in bond yields, particularly as the U.S. Federal Reserve continues to tighten monetary policy. Gold has emerged as the top asset expected to benefit from the trade conflict.

As for the most purchased assets, the "Magnificent Seven" stocks—comprising major tech giants—remain the most popular, with 56% of respondents continuing to favor these high-growth names. Following tech stocks, the U.S. dollar and cryptocurrencies are also seeing significant investments.

While global fund managers are reducing cash reserves to the lowest levels in years, Buffett’s strategy is starkly different. Berkshire Hathaway has been unloading stocks since late 2023, prompted by the belief that U.S. equities were overvalued, particularly with the tech-driven market surge. Despite missing out on significant gains in tech stocks, Buffett has been accumulating cash at an unprecedented rate. At the end of Q3 2024, Berkshire held around $325 billion (468 trillion Korean won) in cash, with this amount likely to have increased further after additional stock sales in Q4 2024.

As we move through 2025, the question remains whether Buffett’s cautious cash strategy or the bullish approach of global fund managers will prove to be the more successful approach in navigating the current market landscape. The contrast between Buffett's cash buildup and the risk-on mentality of fund managers offers an intriguing outlook for the year ahead.