Fears about Greece’s massive debt and associated threats to the eurozone – and the wider global economy – have prompted the world’s fund managers to ask policymakers to add more fiscal stimuli, according to the Bank of America Merrill Lynch survey in May.

The share of investors saying global fiscal policy is “too restrictive” has more than doubled to a net 23 per cent from a net 11 per cent in April. The survey took place from May 4 to May 10, after elections in France and Greece, in which socialist candidate Francois Hollande became president in France and proceedings in Greece ended in a political stalemate.

Almost two-thirds of investors are concerned that Greece will be the source of a negative surprise this year, up sharply from 48 per cent taking that view in April.

The number of respondents saying global monetary policy is “too stimulative” fell to a net 14 per cent from a net 25 per cent. Also, expectations of additional stimulus from the European Central Bank are rising. In May, some 60 per cent of respondents expect the ECB to engage in more direct large-scale quantitative easing by the end of 2012 – up from 51 per cent taking that view in April.

In terms of asset allocation in May, funds have extended positions in cash and bonds while reducing exposure to equities. A net 28 per cent are overweight cash, up from a net 24 per cent in April. While a net 48 per cent were underweight bonds a month ago, that figure has fallen to a net 33 per cent. The proportion of asset allocators overweight equities shrank to a net 16 per cent from a net 28 per cent.

An overall total of 234 panelists with $526 billion of assets under management participated in the survey.

Downbeat

A net 15 per cent of investors expected the global economy to strengthen in the year ahead, down from a net 28 per cent taking that view in February. The proportion of investors predicting inflation to rise in the coming year fell to a net 2 per cent from a net 21 per cent in April.

“Investors have eradicated hopes of growth and inflation that had built up in the early months of the year – and they are looking to policy makers for stimulus,” said Gary Baker, head of European equities strategy at BofA Merrill Lynch Global Research.

Risk-off

Investors have extended the “risk-off” mode that they switched into last month. BofA Merrill Lynch’s Risk and Liquidity Composite Indicator has fallen further to 36 points – further below its historical average of 40 points. A net 35 per cent of the panel says that they are taking lower than normal risks – up from a net 21 percent a month ago.

Appetite for commodities fell back to its lowest level in seven months. A net 2 per cent of the panel is now underweight commodities compared with a net 8 per cent overweight the asset class in April. Weakening demand for commodities can be an indicator of lower global growth and lower inflation.

Some of the earlier enthusiasm for US equities has cooled. However fewer investors are rushing into the US market, and the survey indicates demand could fall in the months ahead.

The proportion of asset allocators overweight US equities fell very slightly to a net 26 per cent from a net 27 per cent. Looking ahead, however, the proportion of investors who would most like to overweight US equities in the coming 12 months fell to a net 6 per cent from a net 18 per cent a month ago.

With Greece and risks surrounding eurozone sovereign bonds at the forefront of investors’ minds again, respondents are reducing exposure to the euro. A net 32 per cent of investors are underweight the euro (unhedged), a significant increase from a net 20 per cent in April and March.