Average cash balances dipped this month as investors trimmed their “extreme” regional views, according to a fund manager poll.

After hitting a 15 year-high of 5.6 per cent last month, cash levels have simmered down to 5.1 per cent in March, with investors boosting their allocations to commodities instead, according to the latest BofA Merrill Lynch Fund Manager Survey.

Commodities saw a record monthly jump in allocation amid a strong rotation of positioning into industrials, energy, materials and emerging markets. Shorting emerging markets became the most crowded trade of the month, trumping long US dollar and shorting oil Europe. 

Meanwhile, growth expectations in China jumped to a four-month high though over a quarter of investors still expect the Chinese economy to weaken over the coming year. Europe remained the most preferred region globally, with cash allocations in the region dropping to average levels and the euro now seen as the cheapest since April 2003.

“With cash levels now slightly above their three-year average, investors no longer are sending the unambiguous buy signal we saw last month,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research. 

Manish Kabra, European equity and quantitative strategist, added that “global investors are trimming their extreme regional views and cite 'quantitative failure’ as the biggest tail risk”. The vast majority of fund managers expect no more than two further rate hikes from the US Federal Reserve in the next year.

Overall, net overweight positions in equities improved. Allocation to Japanese equities, however, fell to a net 15 per cent overweight, down from net 24 per cent overweight in February. As for credit, investors flipped their views, with a net 15 per cent believing high yield will outperform high grade this month, compared to 13 per cent favouring high grade in February.