Bank of America survey reveals bond yield fears overtake AI worries for fund managers
Bond yield fears have overtaken AI bubble anxiety as the top tail risk among institutional investors managing over $470 billion in assets
For months, the AI trade was the thing keeping fund managers up at night. Now they’ve found something scarier: the bond market.
Bank of America’s September 2026 Global Fund Manager Survey shows a notable rotation in what professional investors consider the biggest threat to their portfolios. A disorderly rise in bond yields has climbed to the top of the worry list, with 33% of respondents flagging it as the primary tail risk, up from 27% in August.
AI bubble fears, meanwhile, have quietly deflated. Only 28% of managers now rank it as their top concern, down from 32% the previous month.
The numbers behind the nervousness
The survey, which polled between 170 and 190 fund managers overseeing roughly $470 billion to $512 billion in assets, paints a picture of institutional investors slowly pulling back from their most aggressive positions.
Equity overweight positions dropped to a net 49%, down from 56%.
Cash allocations ticked up slightly to 3.9%.
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Fund managers have pushed their net bond underweight to -48%, the most extreme reading since May 2022. That’s a paradox worth unpacking: managers say rising yields are their biggest fear, yet they remain deeply underweight the very asset class at the center of that fear.
The logic is straightforward. Being underweight bonds is a bet that yields will keep climbing and bond prices will keep falling. The fear isn’t that they’re wrong about the direction. The fear is that yields spike so fast and so violently that it breaks something else in the financial system.
AI spending: still running hot, still making people nervous
A full 79% of respondents said they don’t expect any cuts to AI hyperscaler capex in 2026, up from 71% the prior month.
Some 42% of managers now view hyperscaler capex as a potential source of a systemic credit event.
Long global semiconductors remains the most crowded trade, according to 53% of managers.
Political uncertainty adds fuel to caution
The survey’s timing matters. With US midterm elections approaching, political uncertainty is layering on top of existing market anxieties. The broader shift from equity overweight to a more balanced stance reflects what BofA’s data describes as moderating exuberance due to rising yields, political uncertainties, and persistent risks associated with AI investments.