FUND managers responsible for almost $1 trillion (£522.3 billion) of investment money are at their most bullish about equities for six years and their most bearish about bonds.

The sharply polarised view on prospects for the two types of asset was revealed yesterday in a poll of more than three hundred of the world’s biggest institutional investors. The Merrill Lynch survey also showed that big institutions are suddenly shunning US assets, fearing that the country will be the worst home for their money over the next 12 months.

“There is a very strong bias away from America,” David Bowers, Merrill’s chief investment strategist, said. “US assets are as disliked now as they were at the height of the Enron and WorldCom scandals of 2002.”

The bulk of investors worldwide saw US shares as overvalued and were also concerned about the dollar, he said. Instead, emerging markets and Japan were in favour.

Merrill found more institutions declaring themselves overweight in shares than at any time since it began its monthly poll in 1999.

A net 59 per cent were overweight this month, up from 56 per cent in February and 53 per cent in January. “Once again equity market bears are becoming an endangered species,” Merrill said. Fewer than one in ten investors was now underweight in shares.

But investors remain wary of bonds, fearing that central banks have not done enough to prevent a value-destroying burst of inflation.

“They believe central banks are behind the curve in tackling inflation,” Mr Bowers said. “It comes across in letters the size of a 12-storey building.”

Asked how long it would be before the next rise in interest rates, investors said three months for the US and for Britain, eight months for the eurozone and 12 for Japan. The survey also revealed a surge of interest in pro-cyclical stocks such as energy and industrials, and a shift away from defensive sectors such as utilities.

Merrill said the bullishness on equities “sits uncomfortably” with a global economy that showed little sign of positive growth surprises. One surprise was a growing belief that sovereign bonds will outperform corporate bonds over the next year.

In the UK, fund managers believed that growth would weaken and inflation rise. A net 25 per cent said interest rates were too low. They thought equities were slightly below fair value.

Merrill polled managers of $994 billion in assets between March 4 and 10, including 18 heavyweight managers each responsible for $10 billion or more.

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