MANILA, Philippines - Global fund managers are currently more bullish on bonds and less optimistic about equities as an investment class, according to the findings of a quarterly fund managers’ survey conducted by British banking giant HSBC.

“The low-interest-rate environment has diminished appetite for cash this quarter as investors seek stable growth in still-volatile market conditions,” said Bruno Lee, HSBC’s regional head of wealth management for Asia-Pacific.

“While equities will continue to provide growth opportunities, investors are less likely to expect the returns they enjoyed from the sharp rebound in global markets in midyear,” he said in a December 15 report on the survey.

Over half of fund managers polled (56%) are holding a positive view on bonds in the fourth quarter of 2009, up from 30% in the third quarter, HSBC said.

Seven in 10 respondents (71%) are bullish on global emerging-markets and high-yield bonds, against 43% in the previous quarter, it said.

The survey covered 13 of the world’s leading fund management houses. Together they accounted for $3.72 trillion, or 16.5% of the estimated total global funds under management (FUM) as of the third quarter.

“Bonds have performed strongly this year with the high-yield sector leading the way,” Lee said. “However, with continued economic uncertainty, investors may consider taking positions in the high-grade corporate sector with short to medium tenors to reduce interest rate risk.”

According to the survey, fund managers are less optimistic about equities as an investment class, with a third of respondents (33%) “overweight” in the fourth quarter from 50% in the third quarter.

Being overweight indicates that an investor holds proportionately more than the benchmark weight of a certain asset.

HSBC said that while over half of fund managers (57%) surveyed remain bullish on Greater China equities, this is down from 75% in the third quarter.

The survey participants were AllianceBernstein, Allianz Global Investors, Baring Asset Management, BlackRock, Fidelity Investment Management, Franklin Templeton Investments, HSBC Global Asset Management, Invesco Asset Management, Investec Asset Management, JP Morgan Asset Management, Prudential Asset Management, Schroders Investment Management, and Société Générale.

HSBC said the survey showed that at the end of the third quarter, FUM increased by $356 billion, or 10.6%, from the previous quarter. Equity funds posted an increase of $208 billion, contributing over half (58.5%) of overall FUM growth in the third quarter.

High-yield and emerging-market bonds posted the biggest net inflows as both asset classes performed strongly in the third quarter.

Among equity funds, HSBC said Asia-Pacific (excluding Japan) equities and North America equities posted the biggest net inflows in the third quarter amid signs that economic recovery was broadening.

Emerging-markets equities and Greater China equities continued to record inflows albeit at a slower pace, it said.