At around the same time global equities slid, a survey of investors showed managers reducing risk exposure and increasing holdings of cash.

On the eve of the slide of global equities that saw indices such as the Dow Jones Industrials Average surrender all its gains since January, investors were already bracing for market turmoil by increasing their cash holdings, a global survey shows.

Fund managers are moving out of equities and into cash, with average cash balances in portfolios rising to 4.7 per cent in February from 4.4 per cent in January, the Bank of America Merrill Lynch monthly poll of investors shows. 

Stocks began selling off in early February; fieldwork for the BoA Merrill Lynch poll started on 2 February, ending 8 February. In recent months, there has been much talk about whether global equities are over-expensive and able to sustain levels without genuine gains to earnings. The heightened prospect of rate hikes from the likes of the US Federal Reserve have hit sentiment.

The allocation to equities fell to net 43 per cent from net 55 per cent overweight, the largest one-month decline in two years; allocation to bonds now at a record low of net 69 per cent underweight, the survey shows. A total of 196 panellists with $575 billion of assets under management participated in total.

The survey also showed respondents think that an inflation-induced bond crash (45 per cent) remains at the top of the list of tail risks cited by investors; the top three are rounded out by a policy mistake by the Fed/European Central Bank (18 per cent) and market structure (13 per cent).

The most crowded trades were long FAANG + BAT (Facebook, Amazon, Alphabet, Netflix and Google, and Baidu, Alibaba and Tencent); and short-volatility. 

A majority of investors surveyed (70 per cent) now believe the global economy is in the “late cycle,” the highest level since January, 2008 

Only 5 per cent of fund managers surveyed say global interest rates will be lower in the next year; 80 per cent expect them to rise.

A record net 24 per cent of investors surveyed say global corporate balance sheets are overleveraged; the net percentage that would like to see companies return cash to shareholders remains close to 2009 lows, the survey showed.