By Krishna Eluri
(Reuters) - U.S. fund managers have cut recommendations for equity and bond holdings and increased allocations in alternative investments to near a four-year high as they look for better returns, a Reuters poll found on Thursday.
Fund managers looked to invest more in non-traditional instruments, such as derivatives and commodities, with the recommendation rising to 6.2 percent from 4.1 percent the previous month.
"The most opportunity resides in areas that have fallen out of favor in the past few years," said Tom O'Neil, president of Falcon Advisors.
It is also a hedge against the effects of stock market fluctuation and fears of a global economic slowdown led by China.
With expectations of only gradual rate hikes this year, especially after Federal Reserve Chair Janet Yellen urged caution on raising U.S. interest rates on Tuesday, investors are shying away from bonds.
Stocks also fell at the beginning of the year, although have since recovered. Tthe latest poll of 13 U.S. money managers showed recommended allocations to equities were down to 51.7 percent in March from 51.9 percent the previous month.
Bond holdings in a model portfolio dropped for the third consecutive month, to 35.7 percent from 37.2 percent, slightly below their level a year ago.
They left cash holdings at 4.4 percent, the same as in February and the highest since June last year.
A regional breakdown showed a fall in allocations for North American assets, with stocks down to 64.4 percent, a level not seen for over a year, from 68.3 percent.
It was the same in the fixed-income portfolio, with fund managers reducing North American bond allocation recommendations to 66.1 percent from 71.8 percent in February, the lowest in 28 months.
At the expense of North American assets, fund managers recommended an increase to assets in Britain, emerging Europe and Japan.
(Polling by Krishna Eluri and Anu Bararia, editing by Larry King)