A decline in world equity markets has forced investors to sale back their risk taking and return to recession-proof stocks, according to Merrill Lynch's monthly survey of fund managers.

According to the Bank of America Corp. unit, average cash balances rose to 4.7% in July from 4.2% a month earlier. A net 11% of respondents are now overweighting pharmaceuticals compared with a net 2% underweighting of the sector in June.

Exposure to staples and telecoms also rose. The percentage of investors overweighting materials — a more cyclical sector — fell to a net 1% from a net 15% a month earlier.

Confidence in the global economy remains strong, however, as 79% of respondents said they expect global growth will improve in the next 12 months, up from 78% in June.

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