Overweight cash positions have tumbled to 17 percent of investors surveyed by the bank, down from 28 percent in December. Average cash positions in portfolios have also fallen to the lowest in six months, making up 4.5 percent of managers' funds, down from 5 percent last month.
"Global investors have put some of their cash to work in spite of a more downbeat assessment of global growth and corporate profits," said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, adding that "muted risk appetite" had been regained.
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The oil price collapse has meant that investors have lowered their expectations when it comes to inflation and profits, the bank said -- but not lower growth expectations, as investors remain long U.S. dollar, stocks, and consumer assets.
Fund managers are also starting to see value in oil and energy stocks, but it is still too soon for them to make a move it seems. Some 45 percent of investors surveyed said that oil is undervalued, up from 36 percent in December and at the highest level in exactly six years.
At the same time, 30 percent of the panel said energy stocks are the most undervalued – up from 21 percent the previous month.
"Lower oil prices and hopes for policy stimulus are sustaining both global growth expectations and investor confidence," Hartnett said.
In terms of central bank action, expectations of stimulus from the European Central Bank (ECB) are high, with 72 percent of managers predicting quantitative easing to start in the first quarter of the year.
ECB President Mario Draghi is expected to announce a program of government bond purchases when the central bank meets on Thursday, as he steps up the fight against deflation in the euro zone.
The third quarter is now the most likely timing for a rate hike by the U.S. Federal Reserve, according to the survey. This is a shift from last month, when investors polled by the bank said they expected a Fed interest rate move in the second quarter.