GLOBAL – Fund managers want companies to improve their balance sheets by topping up their pension schemes and repaying debt, according to a new survey by Merrill Lynch.

Merrill’s monthly fund manager survey found that 56% of fund managers wanted companies to use cash flow to improve their balance sheets by dealing with pensions and debt.

The figure compares to 51% in May and 47% in April. Nineteen percent wanted companies to increase their capital spending.

David Bowers, the firm’s chief global investment strategist, said fund managers see no value in stocks, in contrast to previous surveys. “The value has been taken out by the recent rally,” he said. Any extra liquidity would come from bond sales.

Another finding of the survey is that institutional fund managers no longer have excess cash, Bowers said. Cash levels have fallen to 3.9% from five percent in May. “Fund managers are the most fully invested we’ve seen in the last two years.”

Bowers added that two-thirds of survey respondents say the markets are technically overbought in the very short term.

“This survey suggests that some rethink of global growth is taking place.” But, he added: “For me this is not an unambiguously bullish survey.”

Bowers’ colleague, European strategy director Michael Hartnett, said: “Investors despise the euro zone.” The area has the worst profit outlook globally.

Forty-nine percent of managers said they have seen net inflows of cash in the last three months, against 33% who said they had seen net outflows.

Fifty-one percent of euro zone fund managers said they think stocks in the region are fairly- or overvalued, with 48% saying they are undervalued. A net 64% expected euro zone growth to be strong over the next 12 months – up from 46% and 42% in the last two surveys.

Euro zone fund managers were 10% overweight on technology stocks and underweight the auto sector.