There has been a record jump in the number of investors who have taken out insurance against a possible sharp fall in equity markets.
The Bank of America Merrill Lynch fund manager survey for February found that the percentage of investors who have taken out protection against an equities drop over the next three months has risen 20% from a net -50% in January to -30% in February.
Other key findings of the survey are that:
• fund managers are rotating into cash and out of equities in an attempt to reduce risk and exposure to cyclicality
• allocation to equities fell to a net 43% from a net 55% overweight, the largest one-month decline in two years
• allocation to bonds is now at a record low of net 69% underweight
• an inflation-induced bond crash remains at the top of the list of tail risks, which was cited by 45% of investors
• just 5% of fund managers surveyed believe global interest rates will be lower in 2019; 80% expect them to rise
The survey of 196 panellists representing $575 billion (€466 billion) was conducted in the first week of February.
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