The #1 Thing Worrying Hedge Fund Managers Right Now

BofA Merrill Lynch just released the results of its July Fund Manager Survey, which surveys 238 fundies around the world responsible for a combined $643 billion in assets under management.

One of the most striking results of the survey is how investor perceptions toward China can completely turn on a dime.

"China is the biggest area of concern for investors," says BAML Chief Investment Strategist Michael Hartnett. "[The] number of investors expecting stronger China growth collapsed to a net -65%, a massive reversal from 67% in December 2012."

All it takes is two quarters of slowing economic growth, and sentiment among fund managers toward China is now at the lowest level since January 2009, during the height of the global financial crisis.

Meanwhile, fears of a hard landing for the Chinese economy now far and away eclipse anything else as the largest perceived outlier risk to investor portfolios among managers.

The percentage of survey respondents that view China as the biggest tail risk nearly doubled just from June to July.

"Investors continue to view a China hard landing and commodity collapse (56%) as the biggest tail risk," says Hartnett. "In fact, they view [emerging markets] as the greatest potential threat to Financial Market Stability."