A potential no-flow (compression filling of encapsulant) underfill encapsulant for simultaneous solder joint reflow and underfill cure has been reported by the authors. The encapsulant is based on a cycloaliphatic epoxy/organic anhydride/Co(II) acetylacetonate system. The key of this no-flow encapsulant is the use of a latent metal acetylacetonate catalyst that provides the solder reflow prior to the epoxy gellation and fast cure shortly after the solder reflow. However, most of the metal acetylacetonates can easily absorp moisture as their ligand. Therefore, it is of practical importance to understand the effect of the complexed water on the properties of the no-flow material before and after cure. In this paper, differential scanning calorimetry, thermal gravimetric analysis, thermal mechanical analysis, dynamic mechanical analysis, and Fourier transform infrared spectrometry were used to validate the existence of complexed moisture in the Co(II) acetylacetonate. The effects of the complexed water on the curing profile, glass transition temperature, and storage modulus of the cured no-flow underfill material were studied. A possible catalytic mechanism of the metal acetylacetonate in the cycloaliphatic epoxy/anhydride system was subsequently discussed and proposed.