US dollars
© Dave Nagel | Getty Images
Despite the post-Brexit market rally, fund managers have gotten even more wary of taking risks.

The S&P 500 has jumped about 8.5 percent since the lows hit in the days after Britain's move to leave the European Union, but that hasn't assuaged professional investors. Cash levels are now at 5.8 percent of portfolios, up a notch from June and at the highest levels since November 2001, according to the latest Bank of America Merrill Lynch Fund Manager Survey.

In addition to putting money under the mattress, investors also are looking for protection, with equity hedging at its highest level in the survey's history.

Tail risk hedging
Tail risk hedging chart
© BofA Merrill Lunch Global Fund Manager Survey
Indeed, fear is running high as investors believe that global financial conditions are tightening, despite nearly $12 trillion of negative-yielding debt around the world and the U.S. central bank on hold perhaps until 2017.

In fact, fear is running so high that BofAML experts think that it's helping fuel the recent market rally.

"Record numbers of investors saying fiscal policy is too restrictive and the first underweighting of equities in four years suggest that fiscal easing could be a tactical catalyst for risk assets going forward," Michael Hartnett, chief investment strategist, said in a statement.

Positioning changed, with a rotation from euro zone, banks and insurance companies shifting to the U.S., industrials, energy, technology and materials stocks.

Fund managers believe that so-called helicopter money will become a reality, with 39 percent now anticipating the move compared to 27 percent in June. The term refers to money printed by central banks that governments then distribute through the economy in hopes of creating inflation. A similar move, called quantitative easing, in which central banks print money to buy bonds, has failed to generate much in the way of global inflation other than through stock market prices.

The one place where risk has risen is in emerging market equities, with allocations hitting 22-month highs. European stocks went to underweight for the first time in three years, while Japanese equities hit their lowest weighting in 3½ years.