A net 53 per cent of asset allocators are overweight cash, while 40 per cent of respondents to Merrill’s poll are bearish on stocks, 32 per cent are underweight euro zone equities and 40 per cent are underweight UK equities.

Despite the sell-off in equities, only a net 16 per cent of respondents find equities cheap.  Furthermore, the survey demonstrates that investors have an increasingly skeptical view of earnings forecasts.  A net 83 per cent of managers polled believe consensus corporate earnings are "too high". 

A total of 191 fund managers participated in the global survey from 3 July to 11 July, managing a total of $610 billion.

Global investors indicate that they would rather corporates use cash to improve balance sheets, than return money to shareholders.  In a break with recent convention, 39 per cent of respondents to the global survey said they would like companies to prioritise measures such as repaying debt and topping up pension plans.  Only 32 per cent of respondents want companies to focus on share buy backs and dividends. 

“Financial companies have taken steps to repair their balance sheets with an abundance of capital raising initiatives this year,” said Barnaby Martin, credit strategist at Merrill Lynch.