The optimism that marked the start of the year is over and investors have retreated to higher cash positions, according to the latest monthly survey of fund managers from Bank of America Merrill Lync (BofAML).
Cash positions have ‘increased significantly’ since March, states the report, which surveyed 191 global managers with a combined $554 bn in assets.
A net 24 percent of the respondents say they are overweight in cash, a significant rise from a net 6 percent overweight in March. Average cash balances, meanwhile, have risen from 4.2 percent of global portfolio values to 4.7 percent over the same period.
While cash holdings rose, equities went in the other direction. This month, a net 26 percent of asset allocators are overweight in stocks, down from a net 33 percent in March.
Specifically, BofAML says investors are shifting equities out of minerals, which tend to be cyclical, and into pharmaceuticals, which are seen as counter-cyclical.
Unsurprisingly, this shift has happened as concerns about European sovereign solvency have risen. EU sovereign debt funding is seen as the top risk by 54 percent of the panel. Last month, it was the top risk for only 38 percent of the panel.
‘Investors have moved to a more neutral position after positive shifts in sentiment and risk taking in the first quarter,’ says Michael Hartnett, chief global equity strategist at BofAML, in a release. ‘We believe investors will retain a sense of caution throughout the second quarter.’
The results show the end of a four-month run of improved optimism over global economic growth prospects, with a drop from 28 percent to 20 percent of the panel expecting greater global economic strength this year. Investors also expect more quantitative easing in both the EU and the US.
IROs looking to tap investor interest may find a better bet in North America, where there is a distinct bearish atmosphere, according to BofAML.
