Investors are demonstrating growing belief in a robust global recovery and painting a picture of an ideal investment environment, according to the Bank of America Merrill Lynch Survey of Fund Managers for April.

Investors are demonstrating growing belief in a robust global recovery and painting a picture of an ideal investment environment, according to the Bank of America Merrill Lynch Survey of Fund Managers for April.

Belief in macroeconomic growth has intensified; the number of investors taking "above normal" risk in their portfolios is at its highest since January 2006 and investors are more bullish about the ability of companies to increase profitability, the survey, published yesterday, found.

Fund managers predicting "above-trend growth and below-trend inflation" jumped to 32 per cent from 21 per cent in March, the highest reading since the question first appeared on the survey in February 2008.

Inflationary fears remain subdued and 42 per cent of survey respondents said they expect no interest rate hike from the Federal Reserve Board before 2011, up from 38 per cent last month.

Average cash balances in fund managers’ portfolios fell to 3.5 per cent from 3.8 per cent in March, while a net 52 per cent reported being overweight equities, up from a net 33 per cent in February.

"April's survey shows a growing number of investors envisaging a Goldilocks scenario of above trend growth and benign inflation. The findings are consistent with the view that the US consumer, far from remaining in intensive care, is on the path back to good health," Michael Hartnett, chief global equities strategist at BofA Merrill Lynch Global Research, said in the report.

A net 71 per cent of fund managers surveyed believe that corporate earnings will rise 10 per cent or more over the next 12 months, up sharply from a net 53 per cent in March. A net 42 per cent believe that corporations can grow their operating margins in the next 12 months, up from a net 27 per cent in March.

Japan is reaping the benefit of investors' aversion to the euro zone as questions surrounding Greek government debt intensify. A net 12 per cent of global asset allocators are overweight Japanese equities, the highest level since July 2007.

"As recently as five months ago, investors regarded Europe as the most attractive play on global economic recovery. But with the Greek debt crisis Europe has become a no-go zone and asset allocators now view Japanese equities as a cleaner cyclical play," Patrik Schowitz, European Equity strategist at BofA Merrill Lynch Global Research, said.

Nearly 200 fund managers, managing a total of $546 billion, participated in the global survey, and 161 managers, managing $359 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Research and TNS, a market research company.