The BAML survey of 196 participants with a total of $575 billion under management was conducted between Feb. 2 and Feb. 8, when world equity markets fell by more than 5 percent <.MIWO00000PUS>.

The sharp sell off followed higher than expected U.S. wage growth data which raised fears the U.S. Federal Reserve would have to tighten faster than previously anticipated.

In the poll, just 5 percent of fund managers said global interest rates would be lower in the next 12 months, with 80 percent expecting them to rise.

"The February fund manager survey allocation is positioned for higher rates and a weak U.S. dollar but is now less equivocally pro-cyclical and risk-on," the bank said.

Higher bond yields tend to hurt equities because they increase borrowing costs for companies and ultimately consumers. They also present an alternative to investors who may reallocate some cash from equities.

Wall Street suffered a particularly turbulent week, with all its main indices in correction territory, meaning cumulative falls of more than 10 percent from their peak.

Perhaps not surprisingly, investors' allocation to equities fell to a net 43 percent overweight from a net 55 percent overweight, the largest one-month decline since February 2016.

BAML said this 12 percentage point drop was short of the 16 percentage point monthly fall required to signal that a risk asset rout was complete, according to historical survey data.

But it also noted a record 20 percentage point jump in the number of investors taking out protection against a sharp fall in equity markets in the next three months, to a net minus 30 percent in February.

In another sign of caution, cash levels rose to 4.7 percent from 4.4 percent. But Michael Hartnett, chief investment strategist at BAML, said the cash and equity shifts did not move the needle enough to give the all clear to buy the dip.

The top tail risk identified by investors for 2018 was an inflation-induced bond crash, chosen by 45 percent. A policy mistake by the Fed or the European Central Bank was next, cited by 18 percent.

In another pessimistic signal, 70 percent of investors surveyed now believe the global economy is in a "late cycle" phase, the highest level since January 2008.

In a rare bright spot, the allocation to emerging market equities held at a net 41 percent overweight, but UK stocks remained out of favour with a net 36 percent underweight, back to near post-global financial crisis lows.

(Reporting by Claire Milhench; editing by Alexander Smith)

By Claire Milhench