Investors sitting on ‘biggest mountain of cash’ for 15 years as Brexit fears loom

The bank said that fund managers now hold 5.7 per cent in cash, up from an already high level of 5.5 per cent last month with investors citing a Brexit scenario as the biggest tail risk for the world economy, followed by “quantitative failure” and China currency devaluation.

The research carried out through the BofA’s global fund manager survey also showed that risk appetite and global equity allocations are currently at four-year lows.

The poll revealed that in May the average fund manager was net 1 per cent overweight equities, down from 6 per cent last month.

However, allocations to emerging market equities improved to 21-month highs with an average net 6 per cent overweight from 2 per cent in May.

Allocations to Eurozone equities and Japan remained unchanged at 26 per cent overweight and 6 per cent underweight, respectively.

Two-thirds of the fund managers surveyed said a Brexit is “unlikely” or “not at all likely”, which indicates why a record net 26 per cent think sterling is currently undervalued.

BofA Merrill Lynch chief investment strategist, Michael Hartnett, said: “While corporate bond and US stock prices are at record highs, investors have a mountain of cash which means negative summer events could thus quickly become tradable buying opportunities.”