Global fund managers are increasing their allocations to equities in November, even though they think stocks have gotten expensive, a Bank of America-Merrill Lynch survey found.
In November, equity allocations increased to a net 52 percent overweight from October's net 49 percent, the survey found. But at the same time, the number of investors saying equities are expensive hit the highest level since January 2002, with a net 68 percent saying U.S. stocks are richly valued.
But at the same time, investor mistrust over valuations and economic growth has kept cash levels high, pushing up to 4.6 percent in November, the survey found. BofA-ML considers levels above 4.5 percent a contrarian buy signal for equities.
"Investors remain reluctant bulls," said Michael Hartnett, chief investment strategist at BofA-ML, in a statement. "Who would have thought all-time highs in U.S. stock prices would coincide with high cash levels?"
Unlike in the U.S., managers see European equities as undervalued, but the net overweight positions slipped to 41 percent from last month's 46 percent, the survey found.
"Undemanding valuations plus scope for positive surprise on margins are supportive for EU stocks," it said.
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"Europe remains the most preferred region globally, and plans to hold EU stocks on a 12-month basis reached an all-time high," of 36 percent, it said. "Overall, this suggests that the positioning in European stocks likely persists well into 2014."
But emerging markets remain unloved, with a net 1 percent overweight on the region's equities, although it is the first overweight reading for six months.
"With the U.S. dollar seen as extremely undervalued and China growth expectations once again turning negative, allocations to emerging market stocks remain stubbornly low," it said. "Only 3 percent of investors think emerging market equities will match or exceed their 16 percent annualized return over the past decade."
Australia and India are the most unloved Asian markets, while stronger U.S. growth expectations led to a preference for the North Asian markets of Korea, Taiwan and China, it said.
Russia has remained the most loved emerging market for the last six months, with allocations remaining strong at a net 67 percent overweight, the survey found.
But as unloved as emerging markets may be, bonds are even less wanted. Allocations to bonds dropped to tie the April 2006 record low, with a net 69 percent of fund managers underweight, it said. "Bond market fear remains greater than equity market greed," it said.
But nearly half of fund managers don't expect the Federal Reserve to begin tapering its asset purchases, a likely bond market negative, until March at the earliest.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter