By Michael Wursthorn 

Fund managers around the world have crammed into U.S. Treasurys and moved more of their assets into cash in October, more defensive positions as many continued to harbor reservations about the U.S. reaching a trade pact with China.

A survey of 230 fund managers who oversee $620 billion in assets showed that many investors view the U.S.'s continuing trade war with China as the biggest risk to the market despite the small step taken last week toward reaching a truce, according to Bank of America Merrill Lynch. About 43% of those investors say the trade war is "the new normal" and won't be resolved

The bleak outlook has pushed investors to take on more conservative positions in their portfolios by adding cash, betting on U.S. Treasurys to rise and selectively adding stocks that tend to hold up better during periods of economic turbulence.

Cash levels among fund managers rose to 5% from 4.7% last month, pushing further above the 10-year average of 4.6%. Holding U.S. Treasurys was cited as the most crowded, or popular trade among investors, a trend that has been building since June, according to the survey.

Investors also selectively added stocks, buying shares considered more defensive like those in the consumer-staples and health-care spaces while moving out of cyclicals such as materials and banks.

Still, investors say their sour outlook could change if the U.S. reaches a meaningful trade deal with China. About three-quarters of respondents said an end to the trade war poses the biggest potential catalyst for stocks to bounce higher over the next six months.

Write to Michael Wursthorn at Michael.Wursthorn@wsj.com

(END) Dow Jones Newswires

October 15, 2019 11:57 ET (15:57 GMT)