LONDON -- Leading global investors lifted their stock holdings to the highest level this year in May but remained cautious in the face of fragile global growth and higher inflation.
Reuters surveys of 44 investment companies in the United States, continental Europe, Japan and Britain showed greater emphasis on equities but holdings remaining below the long-term average and levels at the end of 2007.
Over all, the average stock allocation in a mixed portfolio in May was 59.5 percent, up from 59.1 percent in April. The long-term average is 60.3 percent.
Investors trimmed bonds to 31.2 percent from 31.3 percent. They kept cash levels at an above average 5.4 percent, a sign of continuing caution. The remaining investments were in alternatives such as property, commodities and hedge funds.
"It looks like the worst of the crisis in terms of systemic risks to the financial system is over," said Tony Dolphin, director of economics and strategy at Henderson Global Investors.
But he added: "We may not have yet seen the worst in terms of its economic impact. For this reason we remain cautious and do not want to chase the equity market rally."
Global equity markets have recovered a good chunk of their credit crisis-related losses since mid-March when the U.S. Federal Reserve came to the rescue of ailing investment bank Bear Stearns.
Global stocks as measured by MSCI have risen about 11.5 percent since mid-March, although they remain about 10 percent below their all-time high last November.
But with the recovery from financial concerns have come new worries about slowing economic growth and rising inflation.
"We are cautious because of conflicting themes — inflation, stagflation, bubbles — but confident on the mid-term normalization," said Patrick de Fraguier, deputy head of the strategy at Credit Agricole Asset Management.
U.S. fund managers slightly increased their already high exposure to stocks, the regional Reuters poll showed.
On average, 11 U.S.-based fund management firms interviewed between May 14 and 28 showed a high allocation to stocks but an increase in bonds as well.
The group held 64.4 percent of their assets in equities, up from a downwardly revised 64.0 percent in April, with cash down to 2.5 percent from 3.0 percent and bonds up at 30.4 percent from an upwardly revised 29.3 percent in April.
Some continental European fund managers raised their bond holdings while many left their asset allocation unchanged as they faced mixed signals on growth and prices.
The monthly survey of 12 investment houses in continental Europe showed equities holdings fell slightly to 48.3 percent of their portfolio after hitting 48.6 percent last month, their highest since December.
Bond holdings rose to 37.1 percent from the previous month's 36.5 percent -- their lowest since December. Cash fell for the second straight month to 4.6 percent.
Japanese fund managers grew more cautious about investing in global stock markets.
The poll of 11 Japan-based institutional investors showed their average stock allocation fell to 54.7 percent from 56.4 percent in the previous survey.
Bond allocations rose to 41.1 percent from 38.8 percent while the weighting for cash slipped to 4.7 percent from 5.4 percent in April.
British fund managers raised their equity and cash holdings and cut their bond allocations.
A poll of 10 fund management firms showed equity holdings rose to 70.6 percent in May from 67.3 percent in April, although they are still well down on the 72.3 percent seen a year ago before the credit crisis began.
Bond positions fell to 16.3 percent in May from 20.7 in April, while cash positions increased to 9.7 percent from 8.5 percent in April.
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