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It’s ‘embarrassing’ to hold cash but there are few alternatives amid tough market, says investment manager

Key Points
  • The surge in valuations has made equities, bonds and currencies more expensive for those who want to invest in these categories.
  • "Cash is a slightly embarrassing thing to hold as an investment manager, (it) suggests you don't have a lot of ideas," Kemp said Monday, "but there aren't a lot of good ideas."
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It's a tough time to be an investor with overvalued markets, CIO says

High valuations across different assets classes are posing very few alternatives to investors, one investment manager told CNBC, adding he would rather sit on cash.

The surge in valuations, mostly seen throughout 2017, has made equities, bonds and currencies more expensive for those who want to invest in these categories. As a result, some money managers believe that the current market environment doesn't offer good opportunities and they would rather save their money to invest at a later stage.

"As we look across the vista of asset classes, whether you look at equities, bonds, currencies, most things look unattractive," Dan Kemp, chief investment officer at Morningstar Investment Management, told CNBC's Squawk Box Europe on Monday.

"It's a tough time to be an investor out there, particularly when you're looking long term," he said, adding that he would rather hold some cash.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Aug. 21, 2017.

He's not the first to suggest such a course of action. In early March, a market strategist told CNBC that there was a new trend in markets: holding cash. At the time, Roger Jones, head of equities at London and Capital, told CNBC that higher interest rates would lead to lower returns on bonds going forward.

If market players believe that yields are going to increase meaningfully, then they will avoid investing in bonds because the price moves inversely to the yield. In such situation, it is preferable to hold cash rather than invest into bonds and lose money.

"Cash is a slightly embarrassing thing to hold as an investment manager, (it) suggests you don't have a lot of ideas," Kemp said Monday, "but there aren't a lot of good ideas."

He added however that he sees some room for gains in U.S. health care companies and European telecoms.

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