Professional money managers and investors are scaling back on their risk-taking in the markets and increasing their cash positions, according to the latest BofA Merrill Lynch survey of fund managers.
The April survey shows professional global investors have been increasing their cash positions since March, with average cash balances in global portfolios rising to 4.7% this month compared to 4.2% in the previous month.
When the average global fund manager’s portfolio has more than 4.5% allocated to cash, that is a significant, noteworthy amount, said Gary Baker, head of European equity strategy at BofA Merrill Lynch Global Research. This indicates to contrarian investors that it’s time to buy equities, he said.
Investors Continue to Fret over Europe
The rush into cash and the general move away from equities has been spurred by concerns about the health of certain European economies, specifically Spain and France, said Baker.
Fiftey-four percent of survey participants said that EU sovereign debt funding is the number one tail risk to the global economy and markets, up from 38% in March.
“The survey highlights that while investors’ primary concern in the EU is Spain’s economy, the outcome of and uncertainty around France’s elections is also figuring high in their decision making,” said Baker.
“Investors have moved to a more neutral position after positive shifts in sentiment and risk taking in the first quarter. We believe investors will retain a sense of caution throughout the second quarter,” said Michael Hartnett, chief global equity strategist at BofA Merrill Lynch Global Research.
The money manager survey by BofA Merrill Lynch compiled responses from 256 institutional investors who manage $706 billion in combined assets. The survey was conducted between April 5 to 12, 2012.
Results from the previous BofA Merrill Lynch survey from March can be found here.
