Fixed income money manager Western Asset Management Co slashed its holdings of European bank debt and shifted to borrowings in the United States, which will benefit from stronger economic growth, Chief Investment Officer Stephen Walsh said on Thursday.

Western Asset's biggest concern is the mounting economic challenge facing Europe that is likely to tip the region into recession, Walsh, who helps oversees $446.7 billion, said on a webcast for the firm's fund investors.

The situation is unlikely to be resolved soon, he said, making it a good time to reduce risk by selling European bank debt "and bringing it back to the U.S."

Western, a unit of Baltimore asset manager Legg Mason Inc., is just one of a number of major bond managers grappling with how to treat their European holdings amid continued uncertainty over the continent's economic future.

Pasadena, California-based Western reduced its exposure to European bank debt to 1.7 percent of its assets in March from 2.7 percent a month earlier, said Mary Athridge, a spokeswoman for the firm.

Western Asset has used periodic rallies in European debt markets, such as in March of 2011 and again this year, as opportunities to divest further, Walsh said. "We have taken those moments to bring down risk," he said.

Debt from U.S. issuers is a better bet because the U.S. economy likely will grow at between 2.5 to 3 percent for the rest of the year, Walsh said.

On Wednesday, a summit of European Union leaders, who have been advised by senior officials to prepare contingency plans in case Greece decides to quit the currency bloc, was unable to shed new light on what eurozone nations plan to do.