Fund managers most negative on equities in 10 years

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) - Fund managers are gloomier about equities than at any time in at least the last 10 years and aversion to risk is close to what it was during the Bear Stearns crisis in March, a Merrill Lynch poll showed on Wednesday.

In its July poll of 191 global fund managers, the investment bank also found investors' love affair with emerging markets to be souring and their demand for safe-haven cash at highs.

But the poll also showed that concern about inflation has waned, suggesting that investors are expecting a slowing global economy to squelch the threat of price rises.

"This very much is the age of extremes," said David Bowers, Merrill's poll consultant.

The survey showed 58 percent of fund managers underweight equities in July versus 50 percent in June and just 35 percent in May.

Most significantly, this was the most underweight the fund managers have been versus those who are overweight in the roughly 10 years of the survey, including the post Internet bubble period.

Cash holdings were the inverse, with a record 60 percent overweight versus 51 percent in June and 42 percent in May.

Reuters latest asset allocation polls of leading investment houses, issued at the end of June, produced a similar finding.