Money managers are becoming more risk averse amid concerns over the end of quantitative easing in the U.S., said Bank of America Merrill Lynch's monthly fund manager survey.
A net 18% of investors surveyed now view the monetary policy as “too stimulative,” the lowest reading since August 2012. In response, investors are increasing their cash holdings. Average cash levels in the portfolios of those surveyed rose to 4.9% in October, up from 4.6% last month. Also, a net 37% of respondents reported being overweight global equities, down 10 percentage points from September. Among the other asset classes, a net 53% and 20% reported being underweight bonds and commodities, respectively, compared to a net 60% and 14% in September.
Investors’ concerns over fiscal policy also rose in October, the survey found. A net 19% of respondents now regard fiscal policy as “too restrictive,” up 12 percentage points from two months ago.
“Cash balances are high, but investors are retreating to benchmark positions rather than staging an exodus from markets,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, in a news release.
Of the 220 respondents, a net 32% expect the global economy to grow in the next 12 months, the lowest reading in two years, and down 20 percentage points from September.
In particular, sentiment toward Europe worsened. A net 4% of respondents reported being overweight in Eurozone equities in October, down 14 percentage points from last month, and only a net 16% of respondents in Europe expect the region’s economy to strengthen over the next 12 months, down 29 percentage points from last month.
In contrast, sentiment toward Japan has improved. A net 32% of respondents reported being overweight Japanese equities in October, the highest reading in 10 months.
The survey of 220 managers with a total of $640 billion in assets under management was conducted Oct. 3-9.
