By Claire Milhench
LONDON (Reuters) - British funds raised their equity holdings in April off March's five-year lows, chasing the global stock market rally that has continued into the second quarter thanks to loose central bank policies.
UK asset managers have been in a broadly risk-averse mood this year, with many positioning for Britain to exit the European Union after a June referendum by selling equities and raising cash and bond holdings in portfolios.
But this month's survey of 11 UK-based investors, carried out between April 15-26, showed some inclination to add risk even though supporters and opponents of leaving the EU are running neck-and-neck in opinion polls.
The poll was conducted just before the U.S. Federal Reserve's April meeting at which it showed little sign of being in a hurry to raise rates.
This, in conjunction with continued stimulus from the European Central Bank and the Bank of Japan's January decision to adopt negative interest rates, has driven global stocks almost 17 percent higher in the past three months (MIWD00000PUS).
"Fed support, along with the loose monetary policies from other central banks such as the ECB, has acted as an insurance policy against any downward pressure on riskier asset classes," said Peter Lowman, chief investment officer at wealth manager Investment Quorum.
Investors boosted overall equity allocations by more than 3 percentage points to 49 percent in April, from March's five-year lows of 45.6 percent. At the same time they trimmed their bond holdings by around 2 percentage points to 23 percent.
Lowman said that with as much as $7.4 trillion of bond markets yielding zero and $9.3 trillion yielding under one percent, global equities looked like better value.
Within equity portfolios, investors bought more U.S. stocks, boosting their weight to 25.2 percent, from 21.1 percent in March. Euro zone holdings were trimmed to 15.8 percent from 17.7 percent and UK holdings were marginally lower at 28.7 percent.
But investors are also questioning how long the rally might run, particularly in emerging markets.
Three out of five of those who expressed a preference took the view that in the short term the gains could continue - but the Fed would need to stay dovish, and the dollar stable.
"Emerging markets have benefited from a slightly weaker U.S. dollar, rising commodity prices and better economic data from China," said Rob Pemberton, investment director at wealth manager HFM Columbus.
"However, they remain a hostage to global events rather than being the masters of their own destiny and remain very vulnerable to any further slowdown in global growth."
Respondents were more united in their view that central banks would not resort to using "helicopter money" this year, with four out of five thinking it unlikely. The term refers to the practise of giving people cash handouts in the hope that they will spend it.
Andrew Milligan, head of global strategy at Standard Life (LON:SL) Investments, said that whilst the investment cycle is now in a late phase, he did not expect a recession as long as policy errors were avoided and financial stresses contained.
"Should economic growth significantly disappoint then central banks will resort to increasingly unorthodox policy measures," he said but noted policymakers' warnings that the hurdles for such measures would be high.