Fund managers are increasing cash holdings and becoming more risk averse amid concerns regarding geopolitical distress and the strength of the global economic recovery, according to Bank of America Merrill Lynch's monthly fund manager survey.
Of the 218 respondents who manage a total of $587 billion in assets, a net 22% responded that they are taking below-normal levels of risk, up from 11% in April.
Also, average cash levels rose to 5% in May, up from 4.8% in April and the highest level since the June 2012 survey.
Of the 170 respondents who responded to the global portion of the survey, a net 66% expects the global economy to grow in the next year, up from 62% in April, but a net 72% of the 170 respondents expect the rate of the growth to be “below normal.”
Thirty-six percent of those respondents also believe a geopolitical crisis provides the biggest tail risk, while 33% believe the risk of Chinese debt defaults poses the biggest tail risk.
“Investors are showing belief in the economy but with two big question marks: Are we on the brink of a disruptive event? And why, at this point in the cycle, isn't this recovery stronger?” said Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch Global Research, in a news release.