The firm’s June fund manager survey found that a net 18% of asset allocators are now overweight cash, up from just 6% in May, with the proportion of investors taking lower-than-average risk in their portfolios rising from 15% in May to 26%.
The average cash weighting has risen from 3.9% of an average portfolio in May to stand at 4.2% in June.
The net percentage overweight equities, by contrast, fell from 41% to 27% over the same period. A rotation into defensives continued, with the pharmaceutical and utility sectors the only ones to see increased allocations on the month.
Nonetheless, almost two thirds of respondents said they do not expect QE3 in the US. “Investors are scaling back risk, but rather than capitulating, they are simply moving to neutral positions in equities, bonds and cash,” said Gary Baker, head of European equities strategy at BofA Merrill Lynch Global Research.
“Investor capitulation from risk assets is not yet visible despite higher cash levels and defensive rotation. Fears on global growth will need to rise further before hopes for QE3 can begin to be priced in, added Michael Hartnett, chief global equity strategist at the firm.