A growing belief among British investment managers that fears of a renewed economic slump are overblown has halted a five-month decline in allocations to stocks, according to a Reuters poll.

The survey of 11 British fund managers polled on asset allocations in August shows the average exposure to equities jumped more than 3 percentage points from a month earlier.

The average allocation to equities climbed to 49.8 percent in August, compared with 46.4 percent in July. Allocations to bonds fell to 24.2 percent from 25.5 percent.

The effect is exaggerated by the participation in August of a large equities-heavy fund manager who did not answer the poll in July but the trend remains the same if results are compared on a like-for-like basis.

The move to shares follows five months in which managers pared allocations to stocks, mostly in favour of bonds, on worries about the sustainability of the global economic recovery.

Concerns about a double-dip recession are certainly overblown. Too few investors look at economic history. In reality such events are really rather rare, especially once a private sector recovery has begun, said Andrew Milligan, head of global strategy at Standard Life Investments .

Some managers noted many large British firms derive significant proportions of their revenues from overseas, making them attractive even though growth in the UK economy is likely to flag when compared with other markets.

In terms of positioning in the UK equity market, we would stress that thanks to the globally diversified nature of the UK equity market, only about a third of market-wide earnings come from the UK economy, said Alec Letchfield, chief investment officer for wealth at HSBC Global Asset Management.

Our UK portfolios are biased towards those UK companies with a high level of overseas, and particularly emerging market earnings.

The shift of the average allocation towards equities has occurred despite widespread remaining jitters about the asset class, with a significant number of respondents continuing to express a preference for other types of exposure.

A double-dip recession is unlikely this year, but recovery has clearly peaked and growth is now slowing. Stay invested in bonds, and underweighted in equities until policymakers resume quantitative easing. Stay long gold to benefit from money printing, said Jeremy Beckwith, chief investment officer at Kleinwort Benson.

(Editing by Stephen Nisbet)

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