Cash accounts for an average of 5.1% of global portfolios, up from 4.5% in July, according to the BofA Merrill Lynch Fund Manager Survey for August.
The survey, released Tuesday, found that fear of a geopolitical crisis combined with the threat of rising U.S. interest rates had prompted global investors to take cash to its highest level since June 2012.
A net 27% of survey respondents were overweight cash in August, up from a net 12% in July.
The proportion of asset allocators overweight equities tumbled by 17 percentage points in one month, to a net 44% in August, according to the survey.
The number of respondents hedging against a sharp fall in equity markets in the next three months has reached its highest level since October 2008.
A total of 224 panelists with $675 billion of assets under management participated in the BofA Merrill Lynch survey from Aug. 1 to Aug. 7.
Global growth predictions have fallen since July, but remain firm, the survey found. A net 56% of participants expected the economy to strengthen in the year ahead, down from a net 69% in the previous month.
Forty-five percent of respondents said fear of a geopolitical crisis was the biggest cause of risk reduction, up from 28% a month ago.
But a new survey question indicated that a rate hike was also making investors nervous, as 65% of the panel expected a U.S. rate rise before the end of the first half of 2015.
“The market melt-up is over, or at least on pause, as investors seek refuge while they digest world events and the prospect of higher rates,” Michael Hartnett, chief investment strategist at BofA Merrill Lynch Research, said in a statement.
Europe Loses Favor
Sentiment toward Europe, the world’s market darling for much of 2014, has fallen significantly.
A net 13% of asset allocators are overweight eurozone equities, a 22 percentage-point drop in one month. U.S. equities also lost ground, but only a four percentage point drop to a net 6%.
A net 30% of global investors believed that the 12-month profit outlook was worse in Europe than in any other region. That reading fell 24 percentage points since July — a record one-month swing, BofA Merrill Lynch noted.
Europe has become more of a region to underweight than overweight. A net 4% of investors surveyed wanted to underweight Europe more than any other region. In July, a net 10% wanted to overweight Europe.