* Equity allocations jump
* Bond holdings dip on concerns of over-valuation
By Claire Milhench
LONDON, Oct 28 (Reuters) - UK fund managers added to equities in October and reduced their exposure to bonds and cash in anticipation of a second round of quantitative easing from central banks, a Reuters poll showed on Thursday.
The survey of 12 British fund managers found that the average equities allocation in global balanced investment portfolios jumped to 53.5 percent from 49.1 percent in September, with UK, Asia ex-Japan and Latin America equities all registering increases.
Cash slipped to 7.1 percent from 8.7 percent as managers decided it made sense to increase their risk exposures ahead of an expected second round of central bank stimulus.
"We have been putting some cash back to work recently, particularly into equities and precious metals," said Neil Michael, executive director, investment strategies at London & Capital. "These assets will benefit from QE because investors will be looking to re-invest the proceeds from the sale of government bonds to the central banks."
He added that the fall in government bond yields, and the rise in asset values resulting from the re-investment of excess cash, will increase access to and reduce the cost of capital, helping to support economic activity. "This in turn will improve company profits, giving a further tailwind to equities."
Within equities there was no change to the average sector weightings, with consumer discretionary remaining the most underweight and materials the most overweight positions.
Bond holdings slipped to 22.2 percent from 24.7 percent, with respondents expressing concern about current valuations and the impact of further quantitative easing.
UK gilts remained the most underweight and corporates the most overweight bond positions.
Alec Letchfield, chief investment officer, UK Wealth, at HSBC Global Asset Management, which has an underweight allocation to bonds, said he saw some near-term risk that additional QE could lengthen the current period of strong bond performance.
"However, our position is based on a longer-term valuation perspective and we are not minded to make changes at this stage," he added.
Allocations to property increased to 2.5 percent from 2 percent, whilst alternatives slipped back to 14.7 percent from 15.5 percent.
Several respondents mentioned making an increased allocation to gold, which is seen as a solid alternative to weak paper currencies and an effective hedge against inflation.
"In the current economic environment, we believe gold will continue to perform well," said Dirk Wiedmann, head of investments at Rothschild Private Banking and Trust.
"By contrast, government bonds look extremely overvalued and the outlook for equities is more mixed, following a strong run in September." (Reporting by Claire Milhench, editing by Stephen Nisbet)