@denisovic This is kind of true but sitting in cash is also pretty bad for them. It signals panic to the retail investors and a shows a general lack of confidence in the markets, which could trigger redemptions for mutual funds, and severely limit inflows
IMO, the mindset from a funds would be to spread out the bets in the hopes that 2-3 big wins can even out the overall losses.
- After the crisis, everyone will be in the red so a bad performance during this period will be justifiable/excusable
- The funds that have 2-3 winning bets can go crazy with marketing saying “we have experts who predicted this and blah blah blah, so we made X% profit. Our overall portfolio is in the red but that’s okay because everyone is in the red”
- The funds who sat on cash can say we withdrew the cash and kept it safe instead of taking risks but that’s not sellable/marketable simply because as a customer you don’t pay an active fund manager to sit on cash
- These managers are competing with other managers AND passive/index investments which means that the bar is set higher for them to be able to justify their existence. When the market recovers, they have to do better than the index funds to justify their fees. With that much pressure on them, I think they’ll be pushed to make more risky bets in the hopes that the wins even out the losses