The latest monthly fund manager survey carried out by Bank of America Merrill Lynch found a record increase in the number of fund managers taking out portfolio protection as they become increasingly concerned about market direction.
The survey questioned nearly 200 global fund managers with $575bn in assets under management between 2-8 February when markets across the world were experiencing falls.
In the US, the Dow Jones fell into correction territory with the Dow Jones dropping almost 10% in a week, while in the UK the FTSE 100 sunk 3% to 7,176 on 6 February.
Volatility also returned with a vengeance as the VIX or 'Fear' index soared 115% to above 50 before last Tuesday's session started; its highest level since August 2015.
The BofAML survey revealed fund managers' allocations to equities fell from net 55% to net 43% overweight, the largest one-month decline in two years. Instead of equities, investors were moving into cash in order to reduce risk and cyclicality.
There was a record one-month jump in investors taking out protection against a sharp fall in equity markets in the next three months. This moved from net -50% in January to net -30%.
Some 70% of investors said they now believed the global economy was in "late-cycle" territory, the highest level since January 2008.
European equities saw allocations move to their lowest in almost a year while investors favoured the US and emerging markets instead.
Looking at fixed income, allocations to bonds were at a record low of net 69% underweight. An inflation-induced bond crash remained a worry for investors with 45% of people questioned citing it as their biggest concern.
Other concerns included a policy mistake by the Federal Reserve or European Central Bank and the market structure.
Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, said: "While this month's survey shows that investors are holding on to more cash and allocating less to equities, neither trait moves the needle enough to give the all clear to buy the dip."