Fund managers are reducing cash holdings and becoming less risk averse due to high liquidity and a fairly optimistic economic outlook, said Bank of America Merrill Lynch's monthly fund manager survey.
A net 66% of respondents expect the global economy to grow over the next year, unchanged from May and higher than the 62% recorded in April's survey. However, a net 78% anticipate below-trend growth.
Average cash levels dropped to 4.5% in June, down from 5% in May and the lowest level since January, when it was also 4.5%.
“Although fund inflows and oil prices argue for near-term consolidation, the case for a summer 'melt-up' remains stronger than for a meltdown as high liquidity and low growth force investor cash levels down,” said Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch Global Research, in a news release.
Sentiment regarding equities and real estate improved in June. A net 48% of managers surveyed reported being overweight global equities, up 11 percentage points from May. Also, a net 6% of managers were overweight real estate, the highest level in eight years.
Meanwhile, a net 62% reported being underweight bonds.
Also, 36% of respondents believe Chinese debt defaults are the biggest tail risk, up from 33% in May.
The survey of 223 fund managers who manage a total of $581 billion in assets was conducted June 6-12.
