Cash levels of fund managers lowest since May 2015: Survey

Nearly 82% of those surveyed expect bond yields to rise over the next 12 months

Average cash held by global fund managers has dropped to its lowest level since May 2015, reveals the Bank of America Merrill Lynch (BofAML) fund manager survey. Cash levels stood at 4.8 per cent in September compared to the peak of 5.8 per cent last October, but above the 10-year average of 4.5 per cent.

“Cash balances dipped this month but remain somewhat elevated. A faster drop in cash leading into 2018 would indicate a sell signal from investors,” said Michael Hartnett, chief investment strategist, BofAML.

A net 41 per cent of investors surveyed are expecting a stronger global economy in the coming year, up from a net 25 per cent last month but still well below the high of net 62 per cent in January of 2017.

Nearly 82 per cent of those surveyed expect bond yields to rise over the next 12 months. 

“Fund managers are positioning for higher yields, rotating over the past month into banks and Japan (assets benefitting from rising rates and inflation) and out of utilities, EM, health care and bonds,” the survey said. 

Most fund managers said the biggest risk for the market is a policy mistake from the US Federal Reserve or the European Central Bank, followed by North Korea and a crash in global bond markets.

BofAML’s latest survey polled 207 panellists managing assets worth $585 billion.