By Natsuko Waki
LONDON, Sept 30 (Reuters) - Leading investors around the world increased equity holdings to their highest level in three months in September and reduced bonds and cash holdings as confidence about the global economy grew, Reuters polls show.
The surveys of 56 top investment houses in the United States, Britain, Europe ex-UK and Japan, published on Thursday, painted a picture of improving risk appetite.
Equity holdings rose in the United States, Europe and Japan, while British, U.S. and Japanese investors boosted alternative asset classes. Cash fell everywhere but in the United States.
Encouraging economic data, especially from Europe and emerging economies, along with pledges from major central banks to keep loose monetary policies, prompted investors to chase a risk rally in September.
"A growing number of institutional investors had been forced to buy this market as the markets continued to extend gains," said Tom Sowanick, chief investment officer of the Princeton, New Jersey-based OmniVest.
Equity holdings rose to 50.8 percent of a mixed asset portfolio in the month from August's 50.4 percent. Their stance was mildly overweight.
Bonds -- which include government bonds and corporate paper -- fell to 36.1 percent from 36.3 percent last month. Bonds remained the most underweighted asset class.
Investors put more cash to work this month, with their liquid holdings falling to 5.4 percent from 5.8 percent.
Jeremy Beckwith, chief investment officer at Kleinwort Benson, said central banks would take more measures to head off the possibility of deflation in the next months, which could in turn provoke inflation.
"In such a situation... equities are attractive now since they're higher-yielding than bonds and attractive in the longer term as an inflation hedge," he said.
REGIONALLY
U.S. fund managers cut their exposure to equities in August and raised their bond allocations.
The survey of 14 U.S.-based fund management firms found an average of 61.7 percent of assets held in equities, compared with 61.5 percent a month earlier. Bonds fell to 31.1 percent in September while cash allocations rose to 3.3 percent.
European fund managers lifted their equity holdings from a one-year trough and cut bonds and cash. The poll of 17 Europe-based asset management firms outside of Britain showed they held 46.6 percent in equities in September.
They held 40.2 percent in bonds, compared with 41.2 percent last month. Cash holdings fell to 6.6 percent.
The survey of 12 British fund managers found their cash allocation slipped to 8.7 percent from 9.1 percent a month earlier. Bond holdings rose to 24.7 percent while equities dropped to 49.1 percent from 49.8 percent having leapt the month before.
In Japan, the survey of 13 managers showed bonds allocation climbed for the first time in three months to 48.5 percent, from 47.9 percent the previous month. Equity holdings hit a six-month high of 45.7 percent while cash fell to the lowest level this year of 2.9 percent.
A poll of nine China fund managers, not included in the global survey, showed an increase in the recommended average equity allocation to their highest level this year of 83.6 percent. Recommended bond weightings fell to a 10-month low of 3.1 percent. (Additional reporting by Jennifer Ablan in New York, Chris Vellacott in London, Chikafumi Hodo in Tokyo, Helen Ding and Samuel Chen in Shanghai, and Bangalore Polling Unit, editing by Mike Peacock)