LONDON, March 28 Global investors grew more cautious this month, reacting to the crisis in Cyprus by adding to safe-haven bond positions, though cash buffers fell to a two-year low, Reuters monthly poll of asset managers showed on Thursday. Investors remain overweight in equities, reflecting faith that the campaign of central banks, particularly in the United States and Japan, to provide cheap money and support economic recovery will keep stock markets rising. But throwing a dampener on discussion of a Great Rotation out of bonds and into equities, funds on aggregate increased their holdings of investments in bonds to 38.3 percent this month, the highest this year and compared with 37.3 percent in February, the poll of 54 leading investment houses in the United States, Europe and Japan showed. Funds clipped their holdings of investments in equities to 50.7 percent in March, compared with 51.3 percent last month and 52.1 percent in January. The January equity allocation levels had been the highest since April 2012. Cash levels fell to their lowest level since Jan 2011 at 4.1 percent, however, as investors continued to put their money to work, down from 4.4 percent in February. The survey was conducted between March 15 and 27, when a chaotic bailout deal for Cyprus took some steam off a rally that had driven world stock markets to their highest since June 2008. "The events in Cyprus are a reminder that the problems in the euro zone are long-term in nature and that these issues are likely to cause periodic crises, particularly given the importance and complexity of politics in the process," said Alec Letchfield, chief investment officer of UK Wealth at HSBC Global Asset Management. Although markets are puzzling over whether the bail-out for Cyprus, which includes a levy on bank deposits, will act as a model for other euro zone rescue operations, investors increased both their equity and bond allocations to the euro zone, to 16 from 15.5 percent and 23.7 from 22.4 percent respectively. A majority of respondents - 17 out of 22 - also said an easing of UK and euro zone fiscal austerity would be positive for European assets. Equity allocations to Japan, where the government has renewed its fight against deflation, rose to 13.7 percent, the highest level since August, from 13.1 percent in February. Most investors expect Wall Street's recent rally to record peaks to continue - 21 out of 27, while 22 out of 31 see the dollar's 5 percent trade-weighted index rise since Feb 1 as the early stages of a long-term, multi-year appreciation. But the majority - 21 out of 32 respondents - expect the U.S. Federal Reserve to continue with quantitative easing this year. The hunt for higher yield continued. Allocations to junk debt remained high, at 13.2 percent, unchanged from February's levels which were the strongest since April 2012. REGIONAL BREAKDOWN U.S. investors held 60 percent of equities in their global balanced portfolios on average this month, compared with 62.3 percent in February. Japanese fund managers lifted their asset allocations for both shares and bonds, as they expect monetary easing around the world to underpin all kinds of asset prices. Allocations to equities rose to 41.3 percent in March, the highest level in four months, from 40.5 percent in February. Bond allocations also ticked up to 52.3 percent from 51.7 percent last month, while the cash allocation fell to a 17-month low of 3.0 percent from 4.3 percent last month. Continental European funds cut their equity holdings again, with events in Cyprus dominating concerns. Investors had 46.9 percent of equities, down from 47.6 percent in February. This is still a high level, given that the weighting hit a 22-month high of 48.3 percent in January. Managers increased their bond holdings to 40.6 percent of their portfolios, from 39.7 percent last month. Cash holdings ticked down to 6 percent, having gradually fallen from above 10 in August. British investment managers eased back on allocations to stocks in March, ending five months of increases after renewed market volatility stemming from Europe. The average exposure to stocks dropped to 54.7 percent in March, from 54.8 in February. Allocations to bonds and cash also fell 10 basis points each, to 25.6 percent and 5.6 percent respectively. For a table of poll results, click on For stories on regional polls, click on
(Additional reporting by Chris Vellacott in London, Maria Pia Quaglia in Milan, Sarmista Sen and Namrata Anchan in Bangalore, Hideyuki Sano in Tokyo and David Randall in Washington; editing by Patrick Graham)
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