| LONDON, June 17
LONDON, June 17 Global investors pumped up their
holdings of equities and real estate in June and cut back on
bonds, reflecting their more enthusiastic outlook for the
world's economy, a closely watched survey showed on Tuesday.
But investors also fretted that equities may be overvalued
and that euro zone periphery debt and U.S. high-yield bonds were
The monthly survey by Bank of America Merrill Lynch, which
polled 167 fund managers with combined assets of $422 billion,
showed asset allocation to equities rose to a net 48 percent
overweight position in June from a net 37 percent last month.
The net reading shows the difference between overweight and
Demand for real estate rose to a net 6 percent overweight,
its highest overweight position in eight years.
Extra stimulus from the European Central Bank, which cut
euro zone deposit rates to negative levels this month, helped
stoke the appetite for riskier assets.
"Overall, the tone is very, very, very optimistic,
especially in the euro zone," said Obe Ejikeme, European equity
and quant strategist at BofA.
Euro zone equity holdings rose to a net 43 percent
overweight, the second highest overweight position since July
2007, before the global financial crisis.
At the same time, however, a net 15 percent of investors
think global equities are overvalued, the measure's strongest
response since 2000.
Overall allocation to relatively safe bonds fell to a net 62
percent underweight from a net 55 percent last month, with a net
75 percent of investors regarding them as overvalued.
Cash levels dropped to 4.5 percent from 5 percent, as
investors grew more confident about putting their money to work.
Some 39 percent of investors think long euro zone peripheral
debt is the most crowded trade, and 28 percent think U.S.
high-yield is too packed.
Yield-hungry investors have been pouring cash into Europe's
peripheral debt, sending yields of Italy, Spain and Ireland -
countries prominent in the euro zone debt crisis - to record
U.S. high-yield debt, meanwhile, is yielding less than
emerging market debt, even though the average credit rating of
the asset class is lower.
Reflecting increased risk appetite, investors moved to an
overweight position in global emerging equities for the first
time since Nov 2013, at 5 percent net overweight from 11 percent
underweight in May.
The possibility of debt defaults in China has become the
most significant risk for investors, followed by "asset mania",
a new category in the survey.
"There is a general underbelly of feeling that the risks
that are out there in China are not going to go away any time
soon, they have built up over a number of years," Ejikeme said.
"The fear is asset manias create systemic problems down the
Geopolitical risk dropped to third place, from first place
last month. The survey was taken before fighting in Iraq
escalated last week.
(Editing by Jeremy Gaunt)