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Global fund managers dash for cash

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The average cash balances within global funds has reached its highest level since November 2001, according to the February Bank of America Merrill Lynch fund manager survey.

The research found the average cash balance of funds run by global asset allocators hit 5.6% in February, as investors showed a preference for capital preservation at the expense of growth.

Indeed allocations to bonds also surged to their highest level since November 2012, while those overweight in equities fell from a net 21% in January, to just a net 5% in February.

Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, says: “Investors have ‘reset’ expectations for macro and markets lower and see default/recession as a risk rather than a reality.”

Backing up this statement, according to the February survey global growth and profit expectations expectations among fund managers turned negative for the first time since July 2012. A net 16% of investors now expect a weaker global economy in the next 12 months, while a net 19% believe a recession will occur within the same timeframe.

Looking towards what is happening in the US, some 90% of the managers surveyed said they expect no more than two more interest rate rises from the Federal Reserve in the next 12 months, more than double from the 40% who predicted the same in December last year.

An overall total of 198 panellists with $591bn of assets under management participated in the survey, which took place between 5-11 February.