Fund firms raise equity weightings as the markets rally

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A survey of 10 UK-based investment firms showed equity holdings rose to a three-month high of 62.4% from 61.7% in February, while bonds fell to 23.7% from 24.1%.

Cash weightings rose to 7.7% from 6.2%, while holdings of alternatives such as hedge funds and private equity fell to 4.6% from 6.4%.

On a like-for-like comparison with February's sample of 11 funds, equity holdings and cash still rose, while alternatives still fell slightly, although bond holdings rose.

Britain's blue chip FTSE 100 index, which has suffered its worst first quarter on record, has nevertheless gained 10% since closing just above 3,500 on 3 March, helped by recent policy measures to inject more money into the economy and by bargain-hunting by investors.

"The equity market will sustain the rally if various conditions fall into place," said Andrew Milligan, head of global strategy at Standard Life Investments.

"Investors have been impressed by the policy stimulus which various governments are implementing, most notably the high profile shifts towards quantitative easing by the U.S., the UK and Switzerland."

Amid the tide of bad news investors have also been able to find limited amounts of positive news.

A survey today showed British consumers grew less gloomy in March as lower mortgage repayments boosted disposable incomes.

Retailer Marks & Spencer on today reported a smaller-than-expected fall in sales, while Barclays shares have risen sharply after reporting strong trading and rejecting an offer to take part in a British government's asset protection scheme.

"If investors believe that the first quarter earnings season shows signs of corporates beginning to stabilise, then yes (the rally can continue," said Henderson Global Investors' Chris Paine, although he added there was a risk of more volatility if this didn't happen.