Investors are getting hungry again for risk, putting cash reserves mostly into equities and finally stepping away from the sidelines after months of caution, according to a new survey of fund managers by Bank of America Merrill Lynch.
For the first time since 2006, the survey found that investors are taking “above average risk, relative to their benchmark.”
Of the fund managers surveyed, a net 2 percent is taking “higher than normal” risk, compared with a net 7 percent taking “below normal risk” in December.
“These figures follow several months of investors displaying optimism about the economy, but maintaining a more cautious risk and investment profile,” Bank of America said in a statement.
Bank of America Merrill Lynch is the marketing name for Bank of America’s global banking and markets businesses. BofA is the top lender in the U.S., and the second-largest credit card issuer behind Chase.
A total of 209 fund managers, managing a total of $539 billion, took part in the global survey Jan. 8-14.
Survey results show that more cash is being invested in equities, with average cash balances falling to 3.4 percent, the lowest level since 2007, and down from 4 percent in December. A net 52 percent of asset managers are “overweight equities,” up significantly from a net 37 percent in December.
“This survey is one of the more bullish we have seen and suggests that investors buy into the idea that this recovery has legs,” said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research.
The managers are urging companies to invest more in their growth through sound investments. The survey found that for the first time since mid-2006 “capital investment” heads the list of investors’ priorities – ahead of reducing debt and returning cash to shareholders.
“We are, however, seeing early signs that might alert contrarians looking for a selling opportunity – namely low cash allocations and possible complacency against a sell off in stocks,” said Michael Hartnett, chief Global Equities strategist at BofA Merrill Lynch Global Research.
