Investors' cash reserves hit 23-month low

By Jeremy Gaunt, European Investment Correspondent

LONDON (Reuters) - Investors put a greater share of their funds into stocks, bonds and alternative investments in June than at any time since the financial crisis blew up in the summer of 2007, Reuters polls showed on Tuesday.

Levels of cash held in reserve dropped to the lowest level since July 2007 as investors bet on an end to the decline of the global economy and on a nascent recovery.

Surveys of 48 top investment houses in the United States, continental Europe, Japan and Britain showed equity holdings at 55.7 percent of an average portfolio, up from 55.2 percent in May and the same as in April.

Bond holdings also rose slightly -- to 35.8 percent from 35.7 percent -- while cash dropped to 4.0 percent from 4.4.

The figures suggest many investors believe the worst of the global recession is over and are shifting from low-return cash accounts into potentially more lucrative assets.

"Over the next month we expect the market to consolidate but we believe in the recovery and our main choices are tracking that strategy over the next 3 months," said Franck Nicolas, head of global allocation at Natixis Asset Management in Paris.

Equity markets traded in a narrow range for much of the month, with MSCI's main world stock index .MIWD00000PUS essentially flat.

But the second quarter was likely to show the largest gain since the index was launched in 1988, up more than 22 percent.

On Monday, the Chicago Board Options Exchange Volatility Index .VIX, often called Wall Street's fear gauge, fell to its level before last September's collapse of Lehman Brothers, which triggered a new leg in the world financial crisis.

REGIONALLY

U.S. fund managers' exposure to stocks rose to the highest level this year in June on growing optimism about the economy.

The poll of 12 U.S.-based fund management firms showed them holding an average of 62.5 percent of their assets in equities, higher than 61.6 percent a month earlier and 60.6 percent at the start of the year. It was the third straight gain.

Bond holdings rose to 31.3 percent from 31.1 percent and cash fell to 2.4 percent from 3.0. <US/ASSET>

Fund managers in continental Europe also pulled capital out of cash and boosted stock holdings.

The monthly survey of 14 investment houses in the region showed equity holdings rose to 47.1 percent of portfolios this month from 45.9 percent in May. Bond holdings rose to 39.3 percent in June from 38.8 percent last month.