Fund managers raise cash at fastest pace since COVID amid Iran war

Wednesday 18 March 2026 - 09:20

By: Dakir Madiha

Fund managers raise cash at fastest pace since COVID amid Iran war

Global investor confidence has fallen to its lowest level in six months as the war involving Iran and growing stress in private credit markets push fund managers toward their most defensive positioning since the early stages of the COVID-19 pandemic.

Bank of America’s March global fund manager survey, covering 210 institutional investors managing 589 billion dollars in assets, showed its sentiment index dropped from 8.2 in February to 5.6. Cash allocations rose from 3.4 percent to 4.3 percent, marking the largest monthly increase since March 2020, when investors rushed to safe assets at the onset of the pandemic.

Geopolitical tensions have become the dominant concern. The conflict escalated after the United States and Israel launched strikes on Iran’s nuclear and missile infrastructure on February 28, leading to disruptions in the Strait of Hormuz, a key route for roughly one fifth of global oil supply. Brent crude moved above 100 dollars per barrel in early March and has remained volatile amid continued attacks on shipping routes and energy facilities.

Geopolitical conflict is now cited as the top tail risk by 37 percent of respondents, up sharply from 14 percent a month earlier. Concerns about an artificial intelligence bubble have dropped to 10 percent. Stagflation has emerged as the prevailing macroeconomic outlook, with 51 percent of fund managers expecting slower growth combined with higher inflation, compared with 42 percent in February. Expectations for global growth weakened sharply, while inflation forecasts increased significantly.

At the same time, stress in private credit markets is adding to investor caution. The survey identified private credit as the leading potential source of a systemic credit event. In recent weeks, major asset managers including BlackRock and Morgan Stanley have imposed limits on withdrawals from private lending funds, while JPMorgan Chase has reduced the valuation of certain software-backed loans tied to these vehicles.

Despite the shift, market positioning has not reached extreme pessimism. Bank of America strategist Michael Hartnett said sentiment remains above levels seen during previous market stress episodes. The share of investors taking above benchmark risk fell from a net 14 percent to negative 14 percent within a month, indicating a clear defensive move but not a full retreat.

Hartnett noted that current sentiment levels could support tactical contrarian strategies. These include short positions in oil if prices rise further above 100 dollars and selective equity buying on declines near 6,600 points on the S&P 500. Meanwhile, expectations for interest rate cuts have declined sharply, with only 17 percent of managers anticipating further easing, down from 46 percent in February, as higher oil prices complicate the outlook for central banks.