Halftime Report

Monday - Friday, 12:00 - 1:00 PM ET

Halftime Report

Why a $60B fund manager is sitting on 20 percent cash

Pro defensive on bonds
Pro defensive on bonds

There's a simple reason BlackRock portfolio manager Dennis Stattman is holding nearly 20 percent in cash.

"We don't like the bond market," he said Tuesday on CNBC's "Halftime Report."

Stattman added that the fund's lower-risk approach to getting a competitive return has historically meant a combination of stocks and bonds.

"But, you know the same story that I know. Coupons in the bond market are simply not adequate to meet our investors' return needs. And spreads, to take credit risks, are skinny also," he said. "While we see a few select opportunities in the world's bond markets, principally outside the U.S., the fact is we just need to be underweight bonds today."

Stattman likes bullish story of Bank of Japan
Stattman likes bullish story of Bank of Japan

Stattman, who oversees $60 billion in assets as head of BlackRock's Global Allocation Team, said that his fund's allocations are: 58 percent in stocks, 23 percent in bonds and 19 percent in cash.

"What I will say about the stock market is we see a lot of individual opportunities. We see a lot of opportunities outside the U.S., particularly in Japan," he said. "Increasingly, we're seeing the U.S. market as fully valued and needing to be fed a diet of good news to keep it up."

The outlook from the Bank of Japan, he added, appears "extraordinarily bullish," with accomodative monetary policy that is "much bigger than what the Fed is doing as a percent of GDP" and the central bank earlier in that cycle.

Read MoreCramer: Street deserves 'F' for these stocks

Stephen Weiss of Short Hills Capital said he agreed with Stattman that the bond market was "way overvalued."

"But I disagree on U.S. equities," he added. "I still think they're cheap, and I attribute the disparity between U.S. equities and European equities to the low-quality banks that bring down the multiple."

Joe Terranova of Virtus Investment Partners saw a clear direction.

"It makes me think, own energy. Own technology. Own those sectors that don't have that high sensitivity to a move in rates, like maybe some of the emerging markets."

Read MoreInvestors eye correction after summer 'melt-up'

By CNBC's Bruno J. Navarro