LONDON (Reuters) – Fund managers have trimmed cash holdings and added risk to their portfolios following the U.S. Federal Reserve’s dovish pivot and after Beijing and Washington agreed a temporary truce to their protracted trade spat, a key investor survey showed on Tuesday.
Bank of America Merrill Lynch’s latest monthly survey found cash levels down to 5.2% in July from 5.6% the previous month, although that’s still elevated compared with the 10-year average of 4.6%.
However, allocation to global equities rose 31 percentage points over the month to take funds to a net 10% overweight. A net 23% of funds said they were overweight emerging markets.
Bond yield expectations were at their lowest since the Lehman Brothers’ collapsed in 2008, while investors said being long U.S. government bonds were the “most crowded” trade for a second straight month, ahead of long U.S. technology and long investment grade corporate bonds.
The trade war was still considered the biggest risk to markets, topping the charts for 15 out of the past 17 surveys, but the proportion of respondents that view it as the main tail risk dropped to 36% from 56% in June.
The poll was conducted among managers with $598 billion in assets between July 5-11.
Reporting by Josephine Mason; editing by Sujata Rao