Fund manager survey finds risk appetite up (by Barbara Kollmeyer)

MADRID (MarketWatch) - More investors are willing to take risk and fewer are predicting a global slowdown, according to the Bank of America Merrill Lynch Survey of Fund Managers for January released Tuesday. The survey of 214 institutional investors shows only a net 3% predict the global economy will weaken in the next 12 months, against 27% in December, the biggest one-month improvement in the global view since May 2009. Risk appetite is also up. with cash level at its lowest levels since July 2011, before the full emergence of the sovereign debt crisis, though investors remained concerned over geopolitical risk. "Investors are tip-toeing rather than hurtling toward higher risk exposure; the U.S. market and high quality cyclical sectors, such as energy and tech, have been the main beneficiaries of lower cash holdings," said Michael Hartnett, chief global equity strategist at BofA Merrill Lynch Global Research. The analysts said asset allocators remain deeply averse to European equities, especially banks, though deeper negative views toward Europe have eased somewhat. Technology has regained its status as the most favored global sector, and U.S. fund managers are returning to banks, the survey said. Hedge funds, meanwhile, reduced their leverage in January to the lowest level since August 2010, after six months where leverage had remained high in spite of wider market volatility.