Cash-heavy mutual fund managers buying on 'Brexit' volatility

By David Randall

NEW YORK (Reuters) - Cash-heavy U.S. mutual fund managers are taking the sell-off triggered by Britain's decision to leave the European Union as an opportunity buy into U.S. companies ranging from biotech to real estate.

Fueling much of the buying: a chance to add shares after a 15.5 percent rally in the benchmark S&P 500 since its February low left many U.S. stocks looking overly expensive.

The S&P dropped 5.3 percent over two days following the so-called 'Brexit' vote last Thursday, and despite a rally since then, it remains about 1.6 percent below its high for the year.

"The market was getting painted with a pretty broad brush and we took the opportunity to buy strategically," said Scott Goginsky, a portfolio manager at Biondo Investment Advisors. He said he is buying healthcare and biotech companies such as Celgene Corp that have little exposure to the United Kingdom.

Shares of the company fell 5.9 percent between Friday and Monday's close but regained those losses by midday on Thursday.

Overall, large-cap fund managers held 3 percent of their portfolios in cash at the end of March, the most recent data available, according to Morningstar. That was the second-largest average cash position over the last four years, following only the 3.4 percent of assets in cash held in September 2015.

Michael Cooke, chief investment officer at SouthernSun Asset Management, said the firm's cash position jumped 8 percentage points on average over the last year in large part because "valuations looked full."

He has been using some of that cash over the last week to add to companies in the waste management and infrastructure sectors that have no international exposure. His fund's largest positions are feed company Darling Ingredients Inc and oil and gas exploration company Clean Harbors Inc, according to Morningstar data.

George Young, a portfolio manager at Villere & Co, said his firm had approximately 15 percent of assets in cash going into the so-called 'Brexit' vote. The firm began buying on Monday, on the theory that traders would have the weekend to digest the implications of the vote.

It added shares of Financial Engines Inc, a technology firm that gives automated advice to 401(k) plan participants, and real estate firm Howard Hughes Corp, because neither had any significant exposure.

"We saw an opportunity to get a good price and we went for it," he said.

(Reporting by David Randall; Editing by Dan Grebler)

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