Global investors are hungry once again for risk, according to the BoA Merrill Lynch Fund Manager Survey.

Global investors are hungry once again for risk, according to the BoA Merrill Lynch Fund Manager Survey for November.

The bank's monthly poll showed that a net 2 per cent of survey respondents are taking above-normal levels of risk, up significantly from October when a net 16 per cent of the panel said they were taking lower than normal levels of risk. The proportion taking out protection against a sharp fall in equities in the coming three months has fallen to minus 39 per cent from minus 35 per cent.

This outcome comes despite deep worries about Europe again tipping into recession and Japan's snap election following its poor economic growth figures over the past six months.

“Deflation might be in the back of investors’ minds, but taking on risk, especially in equities, in Japan and in the dollar is at the forefront of their thinking,” said Michael Hartnett, chief investment strategist at BoA Merrill Lynch Research.

A net 47 per cent of the global panel expects the economy to strengthen in the year ahead, a rise from a net 33 per cent in October. Investors have expressed similar positivity over profits – a net 42 per cent say that global corporate profits will improve in the coming year, up from a net 27 per cent last month.

And investors cannot seem to get enough exposure to Japan. Japanese equities have seen a second big pick up in allocations in consecutive months, and the trend is likely to continue. A net 45 per cent of global asset allocators are overweight Japan, a rise from a net 32 per cent in October and a net 23 per cent in September.  A net 27 per cent says that Japan is the region they are most likely to overweight in the next 12 months. This represents a nine-year high and a rise from a net 14 per cent in October.

“Conviction over Japan appears to be underpinned by a belief in the profit outlook and a view that the country’s stocks are undervalued. A net 26 per cent of respondents identified Japan as having the most favorable profit outlook for the year ahead – a rise of 10 percentage points month-on-month. And a net 17 per cent say that Japanese equities are the most undervalued in the world,” Merrills said in the survey.

Overall a net 13 per cent of respondents to the global survey are overweight cash in November, down from a net 27 per cent in October. The proportion of asset allocators overweight equities has risen by 12 percentage points to a net 46 per cent. Hedge funds have also increased their net allocations to equities – 43 per cent of surveyed hedge funds are net long equities, up from 35 per cent one month ago.

An overall total of 214 panelists with $569 billion of assets under management participated in the survey from 7 November to 13 November.