Asset managers have raised their cash positions to the highest level in 15 years and allocated more money into emerging-market equities than for almost two years, according to the latest monthly fund manager survey by Bank of America Merrill Lynch.

Meanwhile, they are cutting exposure to Japanese and European stocks, in the first BAML poll conducted since Britain voted on June 23 to leave the EU. 

The July poll revealed the average cash position of fund manager respondents was 5.8%, up 0.1% from the month before and the highest level since November 2001. Interestingly, the survey regards an excessively high cash position as being “contrarian bullish” for risk assets. Fund managers, BAML argued, are positioning to buy on market drops.

They seem to expect opportunities in stocks in particular. Survey respondents underweighted global equity investments for the first time in four years, with a net 1% of managers holding an underweight. A record 20% of respondents said they had taken out protection against large drops in stock markets.

However, fund managers are increasingly gaining exposure to emerging-market stocks, with 10% of respondents overweight this asset class, a 22-month high, versus 6% being overweight in the June survey, before the Brexit vote. Additionally, the survey registered a net 11% overweight of EM stocks versus those in developed markets., 

However, managers are very negative about Japanese and European shares. The July survey registered a shift from a net 26% overweight allocation to European stocks in June to a 4% net underweight in July, The survey recorded the biggest net underweight positions to Japan and Europe stocks in three years.  

“For the first time in three years, global investors are underweight European stocks. Europe finally belongs to the bears,” said Manish Kabra, BAML’s European equity quantitative strategist.

In the EM space, managers were most bullish about discretionary, technology and telecoms stocks, with each enjoying an overweight of about 60%. Financials and healthcare were neutrally weighted, and everything else was underweighted. Industrials were particularly reviled, with a 100% underweight.

The cynicism of investors about stock valuations is understandable. The  Dow Jones is sitting at a historic high. Meanwhile Brexit looks likely to have an economic impact on the UK economy and that of the European Union too. Two out of three respondents said they expected the Bank of Japan to conduct more monetary easing at its next meeting.