Investment section

Reasons for holding cash

Liquidity: meet liabilities, uncertainty in the outgo, immediately after a cash inflow, seize investment opportunities.
Short – term tactical reasons: rising interest, recession, depreciation -> overseas investment more attractive

Liquidity

To meet short term liabilities.
institutions with uncertain liability outgo (e.g. non-life insurance companies) may hold more cash to meet unexpected payments
after receipt of a large cash inflow (e.g. a transfer value for a pension scheme), cash may be held whilst the suitability of other investments is considered
maintaining a liquid base allows an investor to take part in investment opportunities that may arise from time to time

Short- term tactical reasons

rising short-term interest rates will tend to depress both bond and equity markets
start of an economic recession
likely to lead to a fall in equity markets and, perhaps, also a rise in government borrowing -> falling bond price
depreciation of domestic currency
makes overseas cash investments more attractive
also, domestic interest rates may be raised to defend currency