Cash has continued to reign this month, with “Brexit” risk remaining at the forefront of fund managers' minds, the global poll shows.

Average cash balances have risen to 5.7 per cent in June, the highest reading since November 2001, as risk appetite and equity allocation stooped to four-year lows, according to the latest BofA Merrill Lynch Survey.

With the UK vote on European Union membership around the corner on 23 June, fund managers are taking a bearish investment approach, with cash levels up from 5.5 per cent last month. A UK exit from the EU or “Brexit” was once again identified as the biggest tail risk, followed by “quantitative failure” and China devaluation/defaults.

However, two-thirds of investors surveyed think a Brexit is unlikely, which explains why a record net 26 per cent of investors think the British pound is undervalued. Worth noting, global growth and profit expectations are at a six-month high and global inflation expectations are at a one-year high.

“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,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.

The survey highlighted a rotation out of discretionary, energy and equities into UK, healthcare/pharma, bonds, industrials and commodities. Investors consider long quality stocks as the most crowded trade, followed by long cash and short emerging markets.

Allocation to eurozone equities remained steady at net 26 per cent overweight, as did allocation to Japanese equities at net 6 per cent underweight. Almost half of investors expect incremental easing from the Bank of Japan this month. Meanwhile, allocation to emerging market equities jumped to a 21-month high, to net 6 per cent overweight from net 2 per cent overweight last month

A total of 213 panellists with $654 billion of assets under management took part in the survey from 3-9 June.