Global fund managers are putting more cash toward equities and fewer are protecting themselves against a fall in stocks, according to a Bank of America Merrill Lynch survey.
Cash balances of the average fund manager in January have fallen to 3.4%, down 0.6 percentage points from December, and 52% of those surveyed are overweight equities, up 13 percentage points from a month earlier, according to the BofA Merrill Lynch Survey of Fund Managers.
The survey also shows that 55% of managers have no protection against a fall in equities in the next three months, up seven percentage points from December.
“This survey is one of the more bullish we have seen and suggests that investors buy into the idea that this recovery has legs,” Gary Baker, head of European equities strategy at BofA Merrill Lynch Global Research, said in a news release about the survey.
A net 55% of respondents said companies are underinvesting, up seven percentage points from December, and 15% say corporate balance sheets are underleveraged, up six percentage points from a month earlier.
Managers are also optimistic about growth over the next year. A net 63% predict corporate earnings will increase by at least 10% in the next 12 months.
Managers also increased exposure to banks in the last month, with the percentage of those underweight the sector dropping 21 percentage points to 16%.
Japan is also back in favor, with 63% expecting a stronger Japanese economy in 2010, up 33 percentage points from November. Eighty-seven percent expect improved earnings for Japan in 2010, up from 59% in November.
The survey of 209 U.S. fund managers and 169 non-U.S. fund managers was conducted Jan. 8-14.