Investors have reduced their exposure to equities and
commodities in favour of cash and bonds, the June survey of fund
managers by Bank of America Merrill Lynch revealed.

According to the survey, the net percentage of overweight
equities in investors’ portfolios fell to 27% from 41% in May, with
Europe leading the way.

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The proportion of fund managers, who ranked eurozone equities as
underweight, rose to a net 15% from 1%. Meanwhile, the proportion
of investors who are overweight in commodities fell to a net 6%
from 12%.

A net 18% of asset allocators now favour cash – this is the
highest cash overweight level since June 2010, the bank said. An
average cash balance of investors’ portfolios rose to 4.2%, up from
3.9% in May.

At the same time, a net 35% of asset allocators are underweight
in bonds, compared with a net 58% in April and 44% in May.

“Investors are scaling back risk, but rather than capitulating,
they are simply moving to neutral positions in equities, bonds and
cash,” said Gary Baker, head of European equities strategy at BofA
Merrill Lynch Global Research.

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Emerging markets – “yes”; China – “no”

Allocations to emerging market equities fell to a net 23% of
asset allocators in June, from a net 29% in May. However, a net 29%
believes the outlook for corporate profits is more favourable in
emerging markets than any other region, up from a net 19% in
May.

Meanwhile, a net 40% of regional fund managers from across
emerging markets, Asia-Pacific and Japan, believe that China’s
economy will weaken in the coming 12 months.

The survey, which was conducted 3 June to 9 June, consisted of
responses by 282 panellists with $828bn of assets under
management.