Fund managers’ cash levels are at their lowest levels since March, 2013 at just 4% of assets, according to Bank of America Merrill Lynch (BofAML).
In its monthly fund manager survey, BofAML surveyed 221 investors with US$676 billion in assets under management.
It found their cash levels were down from 4.2% in January to 4%, compared to a high of 5.7% in June 2019. The five-year average cash weighting was 4.9%.
BofAML said the positioning reflected the underperformance of cash. In Australia, rates set by the Reserve Bank of Australia declined from 1.5% a year ago to 0.75%.
Instead, the survey found there had been a ‘full capitulation’ into deflation winners like US equities, technology, bonds and emerging market equities, and away from inflationary assets such as banks and cash.
Weightings to technology rose nine percentage points to a net 40% overweight, the highest allocation since October, 2016, while emerging market equity allocations rose three percentage points to a net 36% overweight.
Michael Hartnett, chief investment strategist at BofAML, said: “Investor sentiment is less bullish than last month and shows full capitulation into deflation assets.”
Looking at perceived risks, the issue most concerning investors was the US Presidential election while concerns about a US/China trade war had fallen to their lowest since the topic was first raised with respondents in March, 2018.