The “Great De-Risking” — BofA Global Fund Manager Survey:

Key Takeaways

• Cash allocations rise to 4.3%, highest since 2020
• AI exposure declines as valuations stretch
• Investors rotate into utilities, healthcare, consumer staples
• Stagflation fears drive defensive sector positioning
• Liquidity premium re‑emerges, favoring near‑cash assets

Pulse Analysis

The latest Bank of America Global Fund Manager Survey captures a decisive pivot in institutional sentiment. After 18 months of AI‑driven exuberance, fund managers have lifted cash holdings to 4.3% of portfolios, the highest level since the pandemic shock. Higher rates and geopolitical tension are eroding the risk‑on narrative, prompting a broad‑based de‑risking wave that favors liquidity over growth. This shift reflects a reassessment of valuation multiples and execution risk in technology‑heavy themes, signaling that the market cycle may be entering a more defensive phase for investors seeking stability.

For traditional and alternative asset classes, the de‑risking trend translates into clear allocation moves. Investors are channeling capital into defensive sectors—utilities, healthcare, consumer staples, and energy—as well as cash‑like vehicles that now generate meaningful yields in the current climate. Private credit and hedge‑fund strategies that thrive on volatility are likely to attract fresh inflows, while private‑equity sponsors may confront tighter financing and slower exits. At the same time, the re‑emergence of a liquidity premium rewards instruments offering daily redemption and transparency, reshaping the appeal of semi‑liquid funds.

Asset managers now face three plausible macro scenarios: a soft landing that restores growth, persistent stagflation that squeezes both equities and bonds, or a renewed technology‑driven acceleration. Each outcome demands a dynamic allocation framework that balances downside protection with opportunistic cash deployment. Emphasizing manager selection, liquidity planning, and real‑time risk monitoring will differentiate performers as markets oscillate between uncertainty and pockets of dislocation. In this environment, preserving capital while maintaining selective exposure to high‑conviction ideas is likely to be the hallmark of successful portfolios throughout the cycle.