Fund managers are hoarding cash, largely because of concerns about Brexit and China, according to a Bank of America Merrill Lynch survey of investors overseeing $619 billion.
Cash makes up an average 5.5 percent of holdings, the bank said in a report on Tuesday, citing responses from 205 fund managers. That matches levels seen following the 2008 collapse of Lehman Brothers Holdings Inc. and last year when China devalued the yuan.
The possibility of the U.K. voting to leave the European Union is seen as the biggest so-called tail risks to markets, and it has contributed to investors cutting exposure to British stocks to the lowest in more than seven years, Bank of America Merrill Lynch said. Possible devaluation and defaults in China were also cited as risks, along with the potential for central-bank easing failing to revive growth, it said.
Uncertainty about the June 23 U.K. referendum has contributed to the pound falling more than 5 percent, the worst performance among 10 major currencies tracked by Bloomberg Correlation-Weighted Indexes. Issuance of sterling leveraged-loan issuance has also cooled to a 16-year low as private equity firms shun buyouts in the country.
Still, 71 percent of the respondents in the Bank of America Merrill Lynch survey expect the U.K. to vote in favor of remaining in the EU.