Global fund managers’ allocations to UK equities has dropped to the lowest level since 2008 over fears of a Brexit, according to Bank of America Merrill Lynch.

Manish Kabra, European equity quantitative strategist, said that investors now identify Brexit as the “biggest tail risk in the world”.

The UK’s vote whether Britain should stay in or leave the European Union takes place next month on June 23rd.

Bank of America’s May survey shows UK equity allocations plunged to lowest levels since November 2008.

Meanwhile the UK pound (GBP) shows the second most undervalued reading on record.

However, an overwhelming majority of investors polled (71%) think a vote to leave the EU, in other words a Brexit, is unlikely or not at all likely.

"A Brexit is undoubtedly the black swan in the market at the moment," Jan Straatman, chief investment officer at Lombard Odier Investment Management said in a recent note. 

“Nobody knows exactly what the short-term impact of an exit will be and so sentiment rather than fundamentals is likely to drive markets over the next few months.

“Consequently, investors really need to consider the level of risk they currently have within their portfolios.”