Global investors have moved out of equities and now hold an average of 5.2% of portfolios in cash, up from 4.1% in July and nearing the high watermark of 5.5% of December 2008.
In a report from BofA Merrill Lynch Global Research, the bank found 30% of investors were overweight cash compared with their benchmark and asset allocators had scaled back equity positions faster than in any previous month. Just 2% remain overweight equities, down from 35% in July.
BofA Merrill Lynch said asset allocators had also reduced their underweight positions in bonds and reduced holdings in commodities and alternative investments.
“Flows out of equities into cash have reached capitulation levels, especially in the US, but it’s significant that a revival in optimism towards China has survived the global correction,” said chief global equity strategist at BofA Merrill Lynch Global Research Michael Hartnett.
“Investors are waiting for convincing, coordinated action from governments before recommitting their cash to equities,” added Gary Baker, head of European equities strategy.
More than 240 panelists with $718bn of assets under management participated in the research from 5 to 11 August. A further 176 fund managers – managing a total of $551bn – participated in the global survey and 136 managers – managing $359bn – participated in regional surveys.