All but one of 18 fund managers who answered the question said US President Barack Obama and Congress would reach a deal by the end of 2012, averting the $600 billion "fiscal cliff" that threatens to derail the recovery of the world's largest economy. "All eyes are now on the fiscal cliff, where a 'muddling-through' until the end of Q1 2013 can be expected," said Boris Willems, a strategist at UBS Global Asset Management, which manages $90 billion. "Overall, this should be a favourable environment for risky assets, where smaller corrections can be used to buy selected equities at more attractive levels," Willems said.
Allocation to global shares rose to 48.2 percent on average from 46.8 percent last month, while holdings of safe-haven cash fell to 6.1 percent, its lowest level since February 2011. Bonds - often seen as less risky than equities - were also trimmed. Financial services, long the most underweight sector of European fund managers' portfolios, became the most overweight, while US treasuries replaced euro zone debt as the most underweight bond sector by a slim margin.
Despite hopes for an approaching resolution to the US budget crunch, the "fiscal cliff" remained one of the top risks to fund managers' portfolios, as investors said a breakdown in talks would deal a blow to markets. "It would be a huge problem for the United States and, consequently, for the whole world as US consumer spending is still one of the main drivers of global growth," said Nicola Trivelli, CEO of Italian asset manager Sella Gestioni.