Geopolitical tensions and the threat of rising interest rates are leading money managers to reduce risk and increase cash levels, said Bank of America Merrill Lynch's monthly fund manager survey.
A net 45% of respondents believe geopolitical events are the biggest tail risk, up 17% from last month.
Of the 177 respondents who responded to the global portion of the report, a net 27% reported being overweight cash in August, the highest level since June 2012 and up 15 percentage points from July. Average cash levels rose to 5.1%, up 0.6 of a percentage point, also the highest reading since June 2012.
Meanwhile, a net 44% of respondents reported being overweight global equities, down 17 percentage points from July. A net 62% and 5%, respectively, reported being underweight bonds and commodities.
“The market melt-up is over, or at least on pause, as investors seek refuge while they digest world events and the prospect of higher rates,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, in a news release.
Sentiment toward global growth fell in August. A net 56% of respondents expect the global economy to grow in the next year, down 13 percentage points from July.
In particular, sentiment toward Europe worsened. A net 13% of respondents reported being overweight eurozone equities, down 22 percentage points from July.
Managers' outlook on emerging markets, however, improved this month. A net 17% reported being overweight global emerging markets equity, up 12 percentage points from last month.
The survey of 224 managers with a total of $675 billion in assets under management was conducted Aug. 1-7.