Markets have experienced a lot of volatility in February and investor anxiousness has grown along with it.

Bank of America Merrill Lynch's (BAC) monthly fund manager survey showed a record month-to-month jump to 50% from 30% in the net percentage of investors who took out protection against a sharp fall in equity markets over the next three months.

The survey also found that "allocation to equities fell to net 43% from net 55% overweight, the largest one-month decline in two years; allocation to bonds now at a record low of net 69% underweight."

Investors also seemed to be ignoring Bridgewater Associates founder Ray Dialo's warning last month in Davos, Switzerland, against holding cash in this market. Fund managers were increasingly rotating into cash and out of equities to reduce risk and cyclicality. The average cash balance rose to 4.7% in February from 4.4% in January. 

"While this month's survey shows that investors are holding onto more cash and allocating less to equities, neither trait moves the needle enough to give the all clear to buy the dip," said Michael Hartnett, chief investment strategist.

Survey respondents expected the S&P 500 to peak on average at 3,100, nearly 17% higher than the index's current level

A record number of investors surveyed, 24%, said that global corporate balance sheets are overleveraged. Manwhile, the percentage of investors who would like to see companies return cash to shareholders remains close to 2009 lows. 

"European equity allocation is at its lowest in almost a year," said Manish Kabra, head of European quantitative equity strategy. "Despite improving confidence in European earnings, the U.S. and Emerging Market profit cycles seem more favorable to investors right now.