(Bloomberg News) Global investors increased their cash holdings to the highest in a year this month as hedge funds slashed the level of borrowed money invested in stocks, a BofA Merrill Lynch Global Research survey showed.

A net 18 percent of 282 respondents, who together manage $828 billion, were "overweight" cash, the highest since June 2010. That compares with 6 percent in May. Hedge funds cut their so-called gearing levels to 1.27 times capital from 1.53 and an index of risk appetite dropped to 38 from 43, falling below its long-term average of 40 for the first time in nine months.

The MSCI World Index has lost 4.4 percent in June as U.S. jobs and manufacturing data trailed forecasts and speculation grew that Greece may default on its debt. The gauge is still up 1.2 percent this year, buoyed by record-low borrowing costs and government stimulus measures. The measure climbed 0.6 percent at 9:18 a.m. in New York today as China's industrial output topped economists' estimates.

"Risk is clearly off this month," Patrik Schowitz, a European equity strategist at BofA Merrill Lynch, said at a press conference in London today. "Our feeling is the worst is actually behind us, unless we see another leg down in global growth expectations."

Equities, Commodities

Investors cut their holdings of equities and commodities even as the outlook for global growth and corporate profits stabilized following three months of declines, the survey showed. Two-thirds of respondent said they don't expect the Federal Reserve to begin a third round of quantitative easing stimulus measures, known as QE3.

A net 27 percent of money managers were "overweight" equities in June, from 41 percent in May, while holdings in commodities were trimmed to 6 percent overweight from 12 percent, the survey showed. Respondents reduced their "underweight" in bonds to a net 35 percent, from 44 percent last month.

"We have seen a deterioration of risk appetite but there is no sense of investor panic," said Schowtiz. "Where risk has been taken off it's been taken as more of a wait and see. An awful lot of bad economic data is priced into the market."

Developing countries remained the most favored market among respondents, with a net 23 percent overweight the region, down from 29 percent. U.S. equities came in second place, with 20 percent overweight. Japan, Europe and the U.K. remained out of favor as investors further increased their underweight position in all three regions.

This month's survey was conducted from June 3 to June 9.