LONDON (Reuters) - Global investors slashed their holdings of equities below 50 percent this month and piled into cash, reflecting what was lining up to be the worst August for world stocks since 1998.
They also lifted exposure to bonds in North America, Britain and, to a lesser extent, the euro zone, where Germany is considered a safe haven.
Reuters polls of 57 leading investment houses in the United States, Europe ex-UK, Japan and Britain showed the average stock holding in a balanced or model portfolio falling to 49.2 percent.
It was the lowest since at least February 2009, when the current questionnaire was introduced. July’s reading was 52.2 percent, the second month in a row that it had risen.
Bond holdings rose to 36.1 percent in August from 35.3 percent. Cash — where investors go in times of trouble — jumped to 5.8 percent from 4.5 percent.
The moves came as investors fled riskier assets because of signs that the global economy is worsening. The month also saw the credit downgrading of the United States and the euro zone debt crisis continuing.
“While we had been expecting a ‘soft patch’ in terms of economic data during the summer months, the weakness evident in many macroeconomic releases has proven to be greater than many market participants had predicted,” said Paul Amer, investment manager at Insight Investment.
MSCI’s all-country world stock index, one of the broadest gauges of world stocks, lost around 7.75 percent in the month with less than one day of trading to go.
This was likely to be the worst monthly performance since May last year and the worst August since 1998, when it dropped more than 14 percent during the Russian default crisis.
Among the most radical moves in the past month was that by Germany’s Deka Bank, which dumped all its equity holdings.
“Due to the ongoing turbulences following the sovereign debt crisis and a negative outlook on the economy, we decided to reduce the equity portion to zero,” said Steffen Selbach, head of fund-based asset management.
U.S. money managers cut their exposure to equities in August and raised bonds.
The average allocation in August of equity assets fell to 63.0 percent from 65.4 percent the previous month, according to a poll of 14 U.S.-based asset management firms.
They had higher bond allocations at 28.7 percent compared with 27.6 percent in July. Cash holdings fell to 2.6 percent from 2.7 percent in July.
European investors slashed equities and sharply raised cash holdings.
The survey of 17 Europe-based asset management firms outside Britain showed a typical balanced portfolio held 41.2 percent of equities in August, the lowest in at least a year
Bond holdings, including government and corporate debt, stood at 41.9 percent, its highest in at least a year, compared with 41 percent last month. Cash holdings leapt to 10.4 percent from 6.8 percent in July.
Japanese fund managers cut their global stock weighting to a 12-year low in August and their average global bond weighting climbed to match a record high.
The poll of 12 Japan-based institutional investors showed the average equities weighting in model portfolios falling to 42.1 percent from 43.3 percent the previous month and marking its lowest level since January 1999.
Bonds rose to 49.6 percent from 49.0 percent and cash was lifted to 4.9 percent from 4.7 percent.
British fund managers also cut back on equities, but raised their cash holdings considerably.
The 14 funds in the UK poll held 50.4 percent of their money in stocks versus 52.6 percent in July. Bonds rose to 24.4 percent from 23.5 percent.
A fifth poll from China, not included in the overall aggregate because of differences in polling, showed Chinese mutual funds cut their recommended exposure to stocks to the lowest level in 14 months.
Additional reporting by Herbert Lash in New York, Natsuko Waki and Chris Vellacott in London, Yoko Matsudaira in Tokyo, Samuel Shen and Kazunori Takada in Shanghai, and Bangalore Polling Unit. Reporting by Jeremy Gaunt; editing by Stephen Nisbet