At the same time, the number of those overweight equities has tumbled by 17 percentage points in one month. Investors hedging against a sharp fall in equity markets in the coming 12 weeks has also reached its highest level since the onset of the global financial crisis, the bank said.
The latest BoA ML survey follows several weeks of rollercoaster markets around the world with investors taking fright at a series of geopolitical and financial risks including Gaza, Ukraine, Iraq and the bailout of Portugal's Banco Espirito Santo. Global stocks have swung from record highs to heavy selling in the last month, as optimism over corporate earnings met with the political news flow.
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"The market 'melt-up' is over, or at least on pause, as investors seek refuge while they digest world events and the prospect of higher rates," said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Research.
Nervous investors have also shifted "robustly into cash", he said, on uncertainty of what markets have in store as the Federal Reserve prepares to tweak its monetary policy program.
BofA ML said 27 percent of respondents to the global survey overweight cash in August, up from 12 percent in July. Cash now accounts for an average of 5.1 percent of global portfolios, up from 4.5 percent a month ago.
But it is not just money managers that are hanging onto cash. Companies have also been paying down debt or "hoarding" cash, co-head of multi-asset at Henderson Global Investors, Bill McQuaker told CNBC via email.
"Corporates' reticence to invest or deploy balance sheet reserves has resulted in a sharp decline in productivity growth, which acts as a headwind to developed market economies," McQuaker told CNBC.
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"Their caution is a learned behaviour from (quite rightly) protecting themselves during the onslaught of the global financial crisis, which rapidly destroyed human and physical capital," he added.
Aside from de-risking and upping cash, fund managers are no longer so keen on European stocks and are instead turning their sights to emerging markets and Japan.
"Europe's status as the world's market darling for much of 2014 has all but evaporated in the past month, with a big negative swing in the number of investors currently overweight European equities and an even greater negative swing in sentiment about the future," Harnett said.
Global emerging markets and to a lesser extent, Japan, have bucked the "wider global trend of pessimism", with asset allocators upping their overweights in both sectors. BofA ML surveyed a total of 224 panellists with $675 billion assets under management.
—By CNBC's Jenny Cosgrave: Follow her on Twitter