At times like this, when stock market trading screens turn red, ordinary UK investors are probably grateful they have so much of their wealth held in cash.

The average self-invested personal pension (SIPP) in the UK has around 12 per cent of assets held in cash, according to the latest study of the British SIPP’s market by CoreData Research UK.

Yet, this is not a tactical position taken by shrewd investors in the light of choppy market conditions – it is simply that most pension investors tend to suffer from a syndrome sometimes referred to as ‘reckless conservatism’.

This is a tendency to keep savings in bank accounts, where their value may be eroded by inflation, rather than seeking real growth, above inflation, through assets such as equities.

However given the existing volatility in global markets, many investors would be glad they are relatively overweight to cash.

The knock on effect of the recent market downturn is that fund managers will have their work cut out for them in enticing investors to allocate more of these cash reserves to more volatile asset classes.

In the UK, the timing of this sudden market fall could prove particularly significant, given an estimated £125 billion of funds currently held in cash individual savings accounts (ISAs) is eligible to be shifted into equity ISAs from March 2008.

No doubt many fund managers in the UK are eyeing this potential source of new fund flows and coinciding with the run up to next March with a series of campaigns aimed at attracting this pool of cash.

However, as with all best laid plans – events have conspired to make the job of funds management marketing teams all the more difficult.

If the correction in global markets manifests into something more serious and ongoing then interest rates could potentially be cut by central banks concerned about credit problems and if inflation picks up, then cash may become a less attractive asset.

Until now, with interest rates of 5% or more available and inflation relatively low, cash hasn’t looked too bad a place to be.

Even without market tumbles, inertia and fear of losses seem to be the main barriers to investing more widely for many of those with large cash balances in their pension funds or other savings.

In the old days, with-profit funds aimed to offer steady returns without too much excitement.

These funds are now largely discredited as being opaque and for promising more than they delivered in some cases.

So fund manager marketers may well work on new ideas, such as absolute return funds, offering ‘cash plus’ returns, or on diversified growth funds.

Certainly, if someone can come up with an attractive alternative to the standard cash account, they could be seeing some quite enormous inflows from ordinary UK investors.